______________________
(cid:2)(cid:3)(cid:4) (cid:5)(cid:6)(cid:7)(cid:7)(cid:8)(cid:9)(cid:10)(cid:5)(cid:11)(cid:12)(cid:13)(cid:14)(cid:15)(cid:16)(cid:5)
______________________________
(cid:2)
(NYSE: CUBE)
CubeSmart (NYSE: CUBE), a Maryland real estate investment trust, is one of the largest owners and
operators of self-storage facilities in the United States. Our self-storage facilities are designed to offer
affordable and easily-accessible storage space for our residential and commercial customers. As of
December 31, 2012, we owned 381 self-storage facilities located in 22 states and in the District of
Columbia containing an aggregate of approximately 25.5 million rentable square feet. In addition, as of
December 31, 2012, we managed 133 properties for third parties, bringing the total number of properties
we owned and/or managed to 514.
In 2012, we continued to deliver on our core strategic objectives of:
(cid:131) Producing robust organic growth through a deep operating platform and sound fundamental
execution;
(cid:131) Establishing a portfolio of high-quality, well-positioned storage assets concentrated in core
markets with the most attractive long-term prospects; and
(cid:131) Maintaining a conservative, unsecured balance sheet structure that provides an attractive long-
term cost of capital and the flexibility to support our external growth objectives.
The culmination of these efforts contributed to a 13.8% increase in FFO per share, as adjusted, and a 42%
total return for common shareholders. In short, 2012 was a very good year for CubeSmart.
Robust Organic Growth
Fundamental execution starts with our people. At CubeSmart, we have worked diligently to build a
service-oriented culture that fosters the delivery of exceptional service to both internal and external
Customers. We recast our value proposition to our Customers with a new CubeSmart brand and
Superstore service model, and established a dedicated Customer service and training department to
champion our service culture. CubeSmart employees have never had a greater sense of morale and
solidarity than they have today, and, importantly, have begun to receive external recognition for their
outstanding Customer service – namely, an Inside Self Storage Best of Business Award for Customer
Service and three Gold Stevie® Awards for Sales and Customer Service.
We remain committed to building upon our exceptional operating platform, which continues to set us
apart in an industry characterized by wide fragmentation and relatively unsophisticated competition. In
2012, we continued to refine our Internet marketing platform and benefited from increased website traffic,
improved website conversion rates, and greater efficiency of our marketing spend. Likewise, aided by the
implementation of our internally developed Customer relationship management system (eCRM), our
award-winning National Sales Center continued to set new highs for reservation conversion rates.
Finally, we continued to enhance our revenue management systems, which ensure that we are maximizing
the revenue potential from every Customer demand opportunity.
Supported by these initiatives, same-store net operating income grew by a historically strong 6.0% in
2012. Notably, this was supported by all-time high occupancy levels and same-store revenue growth that
accelerated throughout the year.
A Portfolio of High-Quality, Well-Positioned Storage Assets
In 2012, we continued to significantly enhance our portfolio through acquisitions totaling $432.3 million,
as well as the strategic disposition of 26 assets for $60 million. Our acquisitions included the purchase of
22 assets located predominantly in our core investment markets for $128.4 million, the successful
purchase and integration of the remaining six assets from the previously announced Storage Deluxe
transaction for $201.9 million, and the purchase of the remaining interests in two joint ventures. Today,
CubeSmart has a very competitive, high-quality portfolio in place, with a streamlined and simplified
property ownership structure and more than 62% of net operating income coming from our core
investment markets, including industry leading exposure to what we would characterize as the greatest
storage market in the world – New York City.
Our third party management platform has been and continues to be an important part of our portfolio
growth and enhancement initiatives. We continue to see significant and growing interest from private
owners who are struggling to compete with the scale advantages and more sophisticated operating
platforms enjoyed by CubeSmart and other large operators. In 2012, the number of stores in our third-
party management program grew by nearly 30%, from 103 at the end of 2011 to 133 at the end of 2012.
Importantly, our third-party management platform continues to be an attractive pipeline for acquisition
opportunities. Notably, the significant growth in our third-party management platform came despite our
acquisition of 14 stores from the program during the year. Since the launch of our third party
management program in 2010, stores acquired from the program have accounted for more than $200
million of acquisition volume. This platform, combined with our deep industry relationships and
disciplined investment process, provides us a significant competitive advantage as we continue to pursue
our external growth objectives.
A Conservative, Unsecured Balance Sheet Structure
We have long communicated our objective of achieving and maintaining an unsecured balance sheet
structure that affords significant financing and portfolio management flexibility, while supporting an
attractive long-term cost of capital. In 2011, we reached a significant milestone along this path with the
assignment of investment grade credit ratings from Moody’s and Standard & Poor’s. In 2012, our efforts
culminated in the successful execution of our $250 million debut public bond offering. Additionally, with
the repayment of $230 million in secured loans, the Company finished 2012 with a secured debt balance
that represented just 9% of our total gross asset value.
Today, CubeSmart’s financial position has never been stronger, and we have proven access to the full
array of capital sources. In addition to our debut bond offering, and following a common equity offering
and a debut preferred equity offering in 2011, we effectively utilized our “at-the-market” equity program
for $102 million in net proceeds to support our external growth initiatives in 2012. Looking forward, we
expect to continue to fund growth in a manner that maintains credit metrics consistent with our
investment grade rating.
Value Creation
At CubeSmart, one of the values by which we live and work on a daily basis is to “Visualize Success.”
Ultimately, we measure success by the value that we create for our shareholders. By this measure, 2012
was a very good year for CubeSmart and our shareholders. We thank you for your interest and support as
we remain focused on continuing to deliver on our strategic objectives and, ultimately, to build
shareholder value over time.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
OR
For the transition period from to
Commission file number 001-32324 (CubeSmart)
Commission file number 000-54662 (CubeSmart, L.P.)
CUBESMART
CUBESMART, L.P.
(Exact Name of Registrant as Specified in Its Charter)
Maryland (CubeSmart)
Delaware (CubeSmart, L.P.)
(State or Other Jurisdiction of
Incorporation or Organization)
460 East Swedesford Road
Suite 3000
Wayne, Pennsylvania
(Address of Principal Executive Offices)
20-1024732 (CubeSmart)
34-1837021 (CubeSmart, L.P.)
(IRS Employer
Identification No.)
19087
(Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
Common Shares, $0.01 par value per share, of CubeSmart
Title of each class
7.75% Series A Cumulative Redeemable
Preferred Shares of Beneficial Interest, par value $.01 per share, of CubeSmart
New York Stock Exchange
New York Stock Exchange
Name of each exchange on which registered
Registrant’s telephone number, including area code (610) 293-5700
Securities registered pursuant to Section 12(g) of the Act: Units of General Partnership Interest of CubeSmart, L.P.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
CubeSmart
CubeSmart, L.P.
Yes No
Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
CubeSmart
CubeSmart, L.P.
Yes No
Yes No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the past 90 days.
CubeSmart
CubeSmart, L.P.
Yes No
Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
CubeSmart
CubeSmart, L.P.
Yes No
Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge,
in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
CubeSmart
CubeSmart, L.P.
Yes No
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated
filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
CubeSmart:
Large accelerated filer
CubeSmart, L.P.:
Large accelerated filer
Accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Non-accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
CubeSmart
CubeSmart, L.P.
Yes No
Yes No
As of June 30, 2012, the last business day of CubeSmart’s most recently completed second fiscal quarter, the aggregate market value of common shares held by non-affiliates of
CubeSmart was $1,431,731,476. As of February 26, 2013, the number of common shares of CubeSmart outstanding was 133,593,640.
As of June 30, 2012, the aggregate market value of the 4,408,730 units of limited partnership (the “Units”) held by non-affiliates of CubeSmart, L.P. was $51,449,879 based upon the last
reported sale price of $11.67 per share on the New York Stock Exchange on June 30, 2012 of the common shares of CubeSmart, the sole general partner of CubeSmart, L.P. (For this
computation, the market value of all Units beneficially owned by CubeSmart has been excluded.)
Documents incorporated by reference: Portions of the Proxy Statement for the 2013 Annual Meeting of Shareholders of CubeSmart to be filed subsequently with the SEC are
incorporated by reference into Part III of this report.
EXPLANATORY NOTE
This report combines the annual reports on Form 10-K for the year ended December 31, 2012 of CubeSmart (the “Parent Company”
or “CubeSmart”) and CubeSmart, L.P. (the “Operating Partnership”). The Parent Company is a Maryland real estate investment trust,
or REIT, that owns its assets and conducts its operations through the Operating Partnership, a Delaware limited partnership, and
subsidiaries of the Operating Partnership. The Parent Company, the Operating Partnership and their consolidated subsidiaries are
collectively referred to in this report as the “Company.” In addition, terms such as “we,” “us,” or “our” used in this report may refer to
the Company, the Parent Company, or the Operating Partnership.
The Parent Company is the sole general partner of the Operating Partnership and, as of December 31, 2012, owned a 97.6% general
partnership interest in the Operating Partnership. The remaining 2.4% interest consists of common units of limited partnership issued
by the Operating Partnership to third parties in exchange for contributions of properties to the Operating Partnership. As the sole
general partner of the Operating Partnership, the Parent Company has full and complete authority over the Operating Partnership’s
day-to-day operations and management.
Management operates the Parent Company and the Operating Partnership as one enterprise. The management teams of the Parent
Company and the Operating Partnership acting through its general partner are identical.
There are a few differences between the Parent Company and the Operating Partnership, which are reflected in the note disclosures
in this report. The Company believes it is important to understand the differences between the Parent Company and the Operating
Partnership in the context of how these entities operate as a consolidated enterprise. The Parent Company is a REIT, whose only
material asset is its ownership of the partnership interests of the Operating Partnership and subsidiaries of the Operating Partnership.
As a result, the Parent Company does not conduct business itself, other than acting as the sole general partner of the Operating
Partnership, issuing public equity from time to time and guaranteeing the debt obligations of the Operating Partnership and
subsidiaries of the Operating Partnership. The Operating Partnership holds substantially all the assets of the Company and, directly or
indirectly, holds the ownership interests in the Company’s real estate ventures. The Operating Partnership conducts the operations of
the Company’s business and is structured as a partnership with no publicly traded equity. Except for net proceeds from equity
issuances by the Parent Company, which are contributed to the Operating Partnership in exchange for partnership units, the Operating
Partnership generates the capital required by the Company’s business through the Operating Partnership’s operations, by the
Operating Partnership’s direct or indirect incurrence of indebtedness or through the issuance of partnership units of the Operating
Partnership or equity interests in subsidiaries of the Operating Partnership.
The Company believes that combining the annual reports on Form 10-K of the Parent Company and the Operating Partnership into a
single report will:
facilitate a better understanding by the investors of the Parent Company and the Operating Partnership by enabling them to
view the business as a whole in the same manner as management views and operates the business;
remove duplicative disclosures and provide a more straightforward presentation in light of the fact that a substantial portion
of the disclosure applies to both the Parent Company and the Operating Partnership; and
create time and cost efficiencies through the preparation of one combined report instead of two separate reports.
In order to highlight the differences between the Parent Company and the Operating Partnership, the separate sections in this report
for the Parent Company and the Operating Partnership specifically refer to the Parent Company and the Operating Partnership. In the
sections that combine disclosures of the Parent Company and the Operating Partnership, this report refers to such disclosures as those
of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and real
estate ventures and holds assets and debt, reference to the Company is appropriate because the business is one enterprise and the
Parent Company operates the business through the Operating Partnership.
As general partner with control of the Operating Partnership, the Parent Company consolidates the Operating Partnership for
financial reporting purposes. The Parent Company does not have significant assets other than its investment in the Operating
Partnership. The substantive difference between the Parent Company’s and the Operating Partnership’s filings is the fact that the
Parent Company is a REIT with public shares, while the Operating Partnership is a partnership with no publicly traded equity.
2
In the financial statements, this difference is primarily reflected in the equity (or capital for Operating Partnership) section of the
consolidated balance sheets and in the consolidated statements of equity (or capital) and comprehensive income (loss). Apart from the
different equity treatment, the consolidated financial statements of the Parent Company and the Operating Partnership are nearly
identical. The separate discussions of the Parent Company and the Operating Partnership in this report should be read in conjunction
with each other to understand the results of the Company’s operations on a consolidated basis and how management operates the
Company.
This report also includes separate Item 9A (Controls and Procedures) disclosures and separate Exhibit 31 and 32 certifications for
each of the Parent Company and the Operating Partnership in order to establish that the Chief Executive Officer and the Chief
Financial Officer of each entity have made the requisite certifications and that the Parent Company and Operating Partnership are
compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350.
3
PART I
TABLE OF CONTENTS
Item 1.
Business ............................................................................................................................................................
Item 1A.
Risk Factors ......................................................................................................................................................
Item 1B.
Unresolved Staff Comments .............................................................................................................................
Item 2.
Properties ..........................................................................................................................................................
Item 3.
Legal Proceedings .............................................................................................................................................
Item 4.
Mining Safety Disclosures ................................................................................................................................
PART II
Item 5.
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity
Securities ...........................................................................................................................................................
Item 6.
Selected Financial Data .....................................................................................................................................
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ............................
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk ..........................................................................
Item 8.
Financial Statements and Supplementary Data .................................................................................................
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ............................
Item 9A.
Controls and Procedures ...................................................................................................................................
Item 9B.
Other Information .............................................................................................................................................
PART III
Item 10.
Trustees, Executive Officers and Corporate Governance .................................................................................
Item 11.
Executive Compensation ...................................................................................................................................
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters ..........
Item 13.
Certain Relationships and Related Transactions, and Trustee Independence ...................................................
Item 14.
Principal Accountant Fees and Services ...........................................................................................................
PART IV
Item 15.
Exhibits and Financial Statement Schedules ......................................................................................................
5
6
12
23
23
36
36
36
36
38
42
57
57
57
58
59
59
59
59
59
60
60
60
60
4
PART I
Forward-Looking Statements
This Annual Report on Form 10-K and other statements and information publicly disseminated by the Parent Company and the
Operating Partnership, contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements are based on
assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties and other factors, many of
which cannot be predicted with accuracy and some of which might not even be anticipated. Although we believe the expectations
reflected in these forward-looking statements are based on reasonable assumptions, future events and actual results, performance,
transactions or achievements, financial and otherwise, may differ materially from the results, performance, transactions or
achievements expressed or implied by the forward-looking statements. Risks, uncertainties and other factors that might cause such
differences, some of which could be material, include, but are not limited to:
national and local economic, business, real estate and other market conditions;
the competitive environment in which we operate, including our ability to maintain or raise rental rates;
the execution of our business plan;
the availability of external sources of capital;
financing risks, including the risk of over-leverage and the corresponding risk of default on our mortgage and other debt and
potential inability to refinance existing indebtedness;
increases in interest rates and operating costs;
counterparty non-performance related to the use of derivative financial instruments;
our ability to maintain our Parent Company’s qualification as a real estate investment trust (“REIT”) for federal income tax
purposes;
acquisition and development risks;
increases in taxes, fees, and assessments from state and local jurisdictions;
changes in real estate and zoning laws or regulations;
risks related to natural disasters;
potential environmental and other liabilities;
other factors affecting the real estate industry generally or the self-storage industry in particular; and
other risks identified from time to time, in other reports we file with the SEC or in other documents that we publicly disseminate.
Given these uncertainties and the other risks identified elsewhere in this Report, we caution readers not to place undue reliance on
forward-looking statements. We undertake no obligation to publicly update or revise these forward-looking statements, whether as a
result of new information, future events or otherwise except as may be required by securities laws.
5
ITEM 1. BUSINESS
Overview
We are a self-administered and self-managed real estate company focused primarily on the ownership, operation, management,
acquisition and development of self-storage facilities in the United States.
As of December 31, 2012, we owned 381 self-storage facilities located in 22 states and in the District of Columbia containing an
aggregate of approximately 25.5 million rentable square feet. As of December 31, 2012, approximately 84.4% of the rentable square
footage at our owned facilities was leased to approximately 182,000 tenants, and no single tenant represented a significant
concentration of our revenues. As of December 31, 2012 we owned facilities in the District of Columbia and the following 22 states:
Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Maryland, Massachusetts, Nevada, New Jersey, New
Mexico, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Utah, Virginia and Wisconsin. In addition, as of
December 31, 2012, we managed 133 properties for third parties, bringing the total number of properties we owned and/or managed to
514. As of December 31, 2012 we managed facilities in the following 27 states: Alabama, Arizona, Arkansas , California, Colorado,
Connecticut, Florida, Georgia, Illinois, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nevada, New
Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, and
Virginia.
Our self-storage facilities are designed to offer affordable and easily-accessible storage space for our residential and commercial
customers. Our customers rent storage cubes for their exclusive use, typically on a month-to-month basis. Additionally, some of our
facilities offer outside storage areas for vehicles and boats. Our facilities are designed to accommodate both residential and
commercial customers, with features such as wide aisles and load-bearing capabilities for large truck access. All of our facilities have
an on-site manager during business hours, and 256, or approximately 67%, of our owned facilities have a manager who resides in an
apartment at the facility. Our customers can access their storage cubes during business hours, and some of our facilities provide
customers with 24-hour access through computer controlled access systems. Our goal is to provide customers with the highest
standard of facilities and service in the industry. To that end, approximately 76% of our owned facilities include climate controlled
cubes, compared with the national average of 44% reported by the 2013 Self-Storage Almanac.
The Parent Company was formed in July 2004 as a Maryland REIT. The Parent Company owns its assets and conducts its business
through its operating partnership, CubeSmart, L.P. (our “Operating Partnership”), and its subsidiaries. The Parent Company controls
the Operating Partnership as its sole general partner and, as of December 31, 2012, owned an approximately 97.6% interest in the
Operating Partnership. The Operating Partnership has been engaged in virtually all aspects of the self-storage business, including the
development, acquisition, management, ownership and operation of self-storage facilities.
Acquisition and Disposition Activity
As of December 31, 2012 and 2011, we owned 381 and 370 facilities, respectively, that contained an aggregate of 25.5 million and
24.4 million rentable square feet with occupancy rates of 84.4% and 78.4%, respectively.
A complete listing of, and additional information about, our facilities is included in Item 2 of this Annual Report on Form 10-K.
The following is a summary of our 2012, 2011 and 2010 acquisition and disposition activity:
6
Facility/Portfolio
2012 Acquisitions:
Houston Asset ...............................
Dunwoody Asset ...........................
Mansfield Asset ............................
Texas Assets .................................
Allen Asset ...................................
Norwalk Asset ..............................
Storage Deluxe Assets ..................
Eisenhower Asset ..........................
New Jersey Assets ........................
Georgia/ Florida Assets ................
Peachtree Asset .............................
HSREV Assets ..............................
Leetsdale Asset .............................
Orlando/ West Palm Beach Assets
Exton/ Cherry Hill Assets .............
Carrollton Asset ............................
2012 Dispositions:
Michigan Assets............................
Gulf Coast Assets .........................
New Mexico Assets (b) .................
San Bernardino Asset ....................
Florida/ Tennessee Assets .............
Ohio Assets ...................................
2011 Acquisitions:
Burke Lake Asset ..........................
West Dixie Asset ..........................
White Plains Asset ........................
Phoenix Asset ...............................
Houston Asset ...............................
Duluth Asset .................................
Atlanta Assets ...............................
District Heights Asset ...................
Storage Deluxe Assets ..................
Leesburg Asset .............................
Washington, DC Asset ..................
2011 Dispositions:
Flagship Assets .............................
Portage Asset ................................
2010 Acquisitions:
Frisco Asset ..................................
New York City Assets ..................
Northeast Assets ...........................
Manassas Asset .............................
Apopka Asset ................................
Wyckoff Asset ..............................
McLearen Asset ............................
2010 Dispositions:
Sun City Asset ..............................
Inland Empire/Fayetteville Assets
Location
Transaction Date Number of Facilities
Purchase / Sales
Price (in thousands)
Houston, TX
Dunwoody, GA
Mansfield, TX
Multiple locations in TX
Allen, TX
Norwalk, CT
Multiple locations in NY and CT
Alexandria, VA
Multiple locations in NJ
Multiple locations in GA and FL
Peachtree City, GA
February 2012
February 2012
June 2012
July 2012
July 2012
July 2012
February/ April/
August 2012
August 2012
August 2012
August 2012
August 2012
Multiple locations in PA, NY, NJ, VA and FL September 2012
September 2012
November 2012
December 2012
December 2012
Denver, CO
Multiple locations in FL
Multiple locations in NJ and PA
Carrollton, TX
Multiple locations in MI
Multiple locations in LA, AL and MS
Multiple locations in NM
San Bernardino, CA
Multiple locations in FL and TN
Multiple locations in OH
June 2012
June 2012
August 2012
August 2012
November 2012
November 2012
Fairfax Station, VA
Miami, FL
White Plains, NY
Phoenix, AZ
Houston, TX
Duluth, GA
Atlanta, GA
District Heights, MD
Multiple locations in NY, CT and PA
Leesburg, VA
Washington, DC
January 2011
April 2011
May 2011
May 2011
June 2011
July 2011
July 2011
August 2011
November 2011
November 2011
December 2011
Multiple locations in IN and OH
Portage, MI
August 2011
November 2011
Frisco, TX
New York, NY
Multiple locations in NJ, NY and MA
Manassas, VA
Orlando, FL
Queens, NY
McLearen, VA
July 2010
September 2010
November 2010
November 2010
November 2010
December 2010
December 2010
Sun City, CA
Multiple locations in CA and NC
October 2010
December 2010
1
1
1
4
1
1
6
1
2
3
1
9
1
2
2
1
37
3
5
6
1
3
8
26
1
1
1
1
1
1
2
1
16
1
1
27
18
1
19
1
2
5
1
1
1
1
12
1
15
16
$
$
$
$
$
$
$
$
$
$
$
$
5,100
6,900
4,970
18,150
5,130
5,000
201,910
19,750
10,750
13,370
3,100
102,000(a)
10,600
13,010
7,800
4,800
432,340
6,362
16,800
7,500
5,000
6,550
17,750
59,962
14,000
13,500
23,000
612
7,600
2,500
6,975
10,400
357,310
13,000
18,250
467,147
43,500
1,700
45,200
5,800
26,700
18,560
6,050
4,235
13,600
10,200
85,145
3,100
35,000
38,100
7
(a) Purchase price listed represents the fair value of the assets at acquisition.
(b) The Company issued financing in the amount of $5.3 million to the buyer in conjunction with the New Mexico Assets
disposition.
The comparability of our results of operations is affected by the timing of acquisition and disposition activities during the periods
reported. At December 31, 2012 and 2011, we owned 381 and 370 self-storage facilities and related assets, respectively. The
following table summarizes the change in number of owned self-storage facilities from January 1, 2011 through December 31, 2012:
Balance - January 1 .....................
Facilities acquired .......................
Facilities sold ..............................
Balance - March 31 .....................
Facilities acquired .......................
Facilities consolidated .................
Facilities sold ..............................
Balance - June 30 ........................
Facilities acquired .......................
Facilities sold ..............................
Balance - September 30 ..............
Facilities acquired .......................
Facilities sold ..............................
Balance - December 31 ...............
2012
2011
370
6
—
376
2
—
(8)
370
24
(7)
387
5
(11)
381
363
1
—
364
4
(1)
—
367
4
(18)
353
18
(1)
370
Financing and Investing Activities
The following summarizes certain financing activities during the year ended December 31, 2012:
Storage Deluxe Acquisition. During the year ended December 31, 2012, as part of the $560 million Storage Deluxe
transaction involving 22 Class A self-storage facilities located primarily in the greater New York City area, the Company
acquired the final six properties with a purchase price of approximately $201.9 million. The six properties purchased are
located in New York and Connecticut. In connection with the acquisitions, the Company allocated a portion of the purchase
price to the intangible value of in-place leases which aggregated $12.3 million.
Facility Acquisitions. In addition to the Storage Deluxe Acquisition, during the year ended December 31, 2012, we acquired
22 self-storage facilities located throughout the United States for an aggregate purchase price of approximately $128.4
million. In connection with these acquisitions, we allocated a portion of the purchase price to the intangible value of in-place
leases which aggregated $13.2 million.
Investments in Unconsolidated Real Estate Ventures. On September 28, 2012, the Company purchased the remaining 50%
ownership in a partnership that owned nine storage facilities, collectively the HSRE Venture (“HSREV”), for cash of $21.7
million. In addition, upon taking control of these assets, the Company repaid $59.3 million of mortgage loans related to the
properties. Following the acquisition, the Company wholly owns the nine storage facilities which are unencumbered and
have a fair value of $102 million at the date of acquisition. In connection with this acquisition, the Company allocated a
portion of the fair value to the intangible value of in-place leases which aggregated $8.3 million.
Facility Dispositions. During the year ended December 31, 2012, we sold 26 self-storage facilities located throughout the
United States for an aggregate sales price of approximately $60.0 million. These sales resulted in the recognition of gains
that totaled $9.8 million.
Investments in Consolidated Real Estate Ventures. On August 13, 2012, the Company purchased the remaining 50% interest
in the HART joint venture from Heitman for $61.1 million, and now owns 100% of HART. Accordingly, the Company
wholly owns the 22 properties, which are unencumbered by any property-level secured debt. The Company previously
consolidated HART, and therefore the acquisition of the remaining 50% interest is reflected in the equity section of the
accompanying consolidated balance sheets. As a result of the transaction, the Company eliminated noncontrolling interest in
subsidiaries of $38.7 million and recorded a reduction to additional paid in capital of $18.5 million.
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Senior Note Issuance. On June 26, 2012, the Operating Partnership issued $250 million in aggregate principal amount of
unsecured senior notes due July 15, 2022 (the “senior notes”), which bear interest at a rate of 4.80%. The indenture under
which the unsecured senior notes were issued restricts the ability of the Operating Partnership and its subsidiaries to incur
debt unless the Operating Partnership and its consolidated subsidiaries comply with a leverage ratio not to exceed 60% and
an interest coverage ratio of less than 1.5:1 after giving effect to the incurrence of the debt. The indenture also restricts the
ability of the Operating Partnership and its subsidiaries to incur secured debt unless the Operating Partnership and its
consolidated subsidiaries comply with a secured debt leverage ratio not to exceed 40% after giving effect to the incurrence of
the debt. The indenture also contains other financial and customary covenants, including a covenant not to own
unencumbered assets with a value less than 150% of the unsecured indebtedness of the Operating Partnership and its
consolidated subsidiaries. We are currently in compliance with all its financial covenants under the senior notes.
At The Market Program. Pursuant to our sales agreement with Cantor Fitzgerald & Co. (the “Sales Agent”), dated April 3,
2009, as amended on January 26, 2011 and September 16, 2011 (as amended, the “Sales Agreement”), we may sell up to 20
million common shares at “at the market” prices. During the year ended December 31, 2012, we sold 7.9 million shares with
an average sales price of $13.13 per share, resulting in gross proceeds of $103.8 million under the program. The Company
incurred $1.7 million of offering costs in conjunction with these sales.
Business Strategy
Our business strategy consists of several elements:
Maximize cash flow from our facilities — Our operating strategy focuses on maximizing sustainable rents at our facilities
while achieving and sustaining occupancy targets. We utilize our operating systems and experienced personnel to manage the
balance between rental rates, discounts, and physical occupancy with an objective of maximizing our rental revenue.
Acquire facilities within targeted markets — During 2013, we intend to pursue selective acquisitions in markets that we
believe have high barriers to entry, strong demographic fundamentals and demand for storage in excess of storage capacity. We
believe the self-storage industry will continue to afford us opportunities for growth through acquisitions due to the highly
fragmented composition of the industry.
Dispose of facilities not in targeted markets — During 2013, we intend to continue to reduce exposure in slower growth, lower
barrier-to-entry markets. We intend to use proceeds from these transactions to fund acquisitions within target markets.
Grow our third party management business — We intend to pursue additional third party management opportunities in
markets where we currently maintain management that can be extended to additional facilities. We intend to leverage our
current platform to take advantage of consolidation in the industry. We plan to utilize our relationships with third party owners
to help source future acquisitions.
Investment and Market Selection Process
We maintain a disciplined and focused process in the acquisition and development of self-storage facilities. Our investment
committee, comprised of our named executive officers and led by Dean Jernigan, our Chief Executive Officer, oversees our
investment process. Our investment process involves six stages — identification, initial due diligence, economic assessment,
investment committee approval (and when required, Board approval), final due diligence, and documentation. Through our
investment committee, we intend to focus on the following criteria:
Targeted markets — Our targeted markets include areas where we currently maintain management that can be extended to
additional facilities, or where we believe that we can acquire a significant number of facilities efficiently and within a short
period of time. We evaluate both the broader market and the immediate area, typically five miles around the facility, for its
ability to support above-average demographic growth. We seek to increase our presence primarily in areas that we expect will
experience growth, including the Northeastern and Middle Atlantic areas of the United States and areas within Georgia, Florida,
Texas, Illinois and California and to enter new markets should suitable opportunities arise.
Quality of facility — We focus on self-storage facilities that have good visibility and are located near retail centers, which
typically provide high traffic corridors and are generally located near residential communities and commercial customers.
Growth potential — We target acquisitions that offer growth potential through increased operating efficiencies and, in some
cases, through additional leasing efforts, renovations or expansions. In addition to acquiring single facilities, we seek to invest in
portfolio acquisitions, including those offering significant potential for increased operating efficiency and the ability to spread
our fixed costs across a large base of facilities.
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Segment
We have one reportable segment: we own, operate, develop, manage and acquire self-storage facilities.
Concentration
Our self-storage facilities are located in major metropolitan areas as well as suburban areas and have numerous tenants per facility.
No single tenant represented a significant concentration of our 2012 revenues. Our facilities in New York, Florida, California, and
Texas provided approximately 16%, 15%, 10% and 10%, respectively, of our total 2012 revenues. Our facilities in Florida,
California, Texas and Illinois provided approximately 17%, 12%, 10% and 7%, respectively, of our total 2011 revenues.
Seasonality
We typically experience seasonal fluctuations in occupancy levels at our facilities, with the levels generally slightly higher during
the summer months due to increased moving activity.
Financing Strategy
Although our organizational documents do not limit the amount of debt that we may incur, we maintain a capital structure that we
believe is reasonable and prudent and that will enable us to have ample cash flow to cover debt service and make distributions to our
shareholders. As of December 31, 2012, our debt to total capitalization ratio (determined by dividing the carrying value of our total
indebtedness by the sum of (a) the market value of the Parent Company’s outstanding common shares and units of the Operating
Partnership held by third parties and (b) the carrying value of our total indebtedness) was approximately 34.2% compared to
approximately 36.0% as of December 31, 2011. Our ratio of debt to the depreciated cost of our real estate assets as of December 31,
2012 was approximately 49.0% compared to approximately 42.4% as of December 31, 2011. We expect to finance additional
investments in self-storage facilities through the most attractive available sources of capital at the time of the transaction, in a manner
consistent with maintaining a strong financial position and future financial flexibility. These capital sources may include borrowings
under the revolving portion of our 2011 Credit Facility and additional secured or unsecured financings, sales of common or preferred
shares of the Parent Company in public offerings or private placements, and issuances of common or preferred units in our Operating
Partnership in exchange for contributed properties or cash and formations of joint ventures. We also may sell facilities that we no
longer view as core assets and reallocate the sales proceeds to fund other acquisitions.
Competition
Over the last decade, new self-storage facility development has intensified the competition among self-storage operators in many
market areas in which we operate. Self-storage facilities compete based on a number of factors, including location, rental rates,
security, suitability of the facility’s design to prospective customers’ needs and the manner in which the facility is operated and
marketed. In particular, the number of competing self-storage facilities in a particular market could have a material effect on our
occupancy levels, rental rates and on the overall operating performance of our facilities. We believe that the primary competition for
potential customers of any of our self-storage facilities comes from other self-storage facilities within a three-mile radius of that
facility. We believe our facilities are well-positioned within their respective markets and we emphasize customer service,
convenience, security and professionalism.
Our key competitors include local and regional operators as well as the other public self-storage REITS, including Public Storage,
Sovran Self Storage and Extra Space Storage Inc. These companies, some of which operate significantly more facilities than we do
and have greater resources than we have, and other entities may generally be able to accept more risk than we determine is prudent for
us, including risks with respect to the geographic proximity of facility investments and the payment of higher facility acquisition
prices. This competition may generally reduce the number of suitable acquisition opportunities available to us, increase the price
required to consummate the acquisition of particular facilities and reduce the demand for self-storage space in areas where our
facilities are located. Nevertheless, we believe that our experience in operating, managing, acquiring, developing and obtaining
financing for self-storage facilities should enable us to compete effectively.
Government Regulation
We are subject to various laws, ordinances and regulations, including regulations relating to lien sale rights and procedures and
various federal, state and local environmental regulations that apply generally to the ownership of real property and the operation of
self-storage facilities.
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Under various federal, state and local laws, ordinances and regulations, an owner or operator of real property may become liable for
the costs of removal or remediation of hazardous substances released on or in its property. These laws often impose liability without
regard to whether the owner or operator knew of, or was responsible for, the release of such hazardous substances. The presence of
hazardous substances, or the failure to properly remediate such substances, when released, may adversely affect the property owner’s
ability to sell the real estate or to borrow using the real estate as collateral, and may cause the property owner to incur substantial
remediation costs. In addition to claims for cleanup costs, the presence of hazardous substances on a property could result in a claim
by a private party for personal injury or a claim by an adjacent property owner or user for property damage. We may also become
liable for the costs of removal or remediation of hazardous substances stored at the facilities by a customer even though storage of
hazardous substances would be without our knowledge or approval and in violation of the customer’s storage lease agreement with us.
Our practice is to conduct or obtain environmental assessments in connection with the acquisition or development of facilities.
Whenever the environmental assessment for one of our facilities indicates that a facility is impacted by soil or groundwater
contamination from prior owners/operators or other sources, we work with our environmental consultants and, where appropriate,
state governmental agencies, to ensure that the facility is either cleaned up, that no cleanup is necessary because the low level of
contamination poses no significant risk to public health or the environment, or that the responsibility for cleanup rests with a third
party. In certain cases, the Company has purchased environmental liability insurance coverage to indemnify the Company against
claims for contamination or other adverse environmental conditions that may affect a property.
We are not aware of any environmental cleanup liability that we believe will have a material adverse effect on us. We cannot
assure you, however, that these environmental assessments and investigations have revealed or will reveal all potential environmental
liabilities, that no prior owner created any material environmental condition not known to us or the independent consultant or that
future events or changes in environmental laws will not result in the imposition of environmental liability on us.
We have not received notice from any governmental authority of any material noncompliance, claim or liability in connection with
any of our facilities, nor have we been notified of a claim for personal injury or property damage by a private party in connection with
any of our facilities relating to environmental conditions.
We are not aware of any environmental condition with respect to any of our facilities that could reasonably be expected to have a
material adverse effect on our financial condition or results of operations, and we do not expect that the cost of compliance with
environmental regulations will have a material adverse effect on our financial condition or results of operations. We cannot assure
you, however, that this will continue to be the case.
Insurance
We carry comprehensive liability, fire, extended coverage and rental loss insurance covering all of the facilities in our portfolio. We
carry environmental insurance coverage on certain properties in our portfolio. We believe the policy specifications and insured limits
are appropriate and adequate given the relative risk of loss, the cost of the coverage and industry practice. We do not carry insurance
for losses such as loss from riots, war or acts of God, and, in some cases, environmental hazards, because such coverage is not
available or is not available at commercially reasonable rates. Some of our policies, such as those covering losses due to terrorist
activities, hurricanes, floods and earthquakes, are insured subject to limitations involving large deductibles or co-payments and policy
limits that may not be sufficient to cover losses. We also carry liability insurance to insure against personal injuries that might be
sustained on our properties and director and officer liability insurance.
Offices
Our principal executive office is located at 460 E. Swedesford Road, Suite 3000, Wayne, PA 19087. Our telephone number is
(610) 293-5700.
Employees
As of December 31, 2012, we employed 1,409 employees, of whom 188 were corporate executive and administrative personnel and
1,221 were property level personnel. We believe that our relations with our employees are good. Our employees are not unionized.
Available Information
We file registration statements, proxy statements, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, and amendments to those reports, with the SEC. You may obtain copies of these documents by visiting the SEC’s
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, by calling the SEC at 1-800-SEC-0330 or by accessing the
SEC’s website at www.sec.gov. Our internet website address is www.cubesmart.com. You also can obtain on our website, free of
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charge, a copy of our annual report on Form 10-K, the Operating Partnership’s registration statement on Form 10, our quarterly
reports on Form 10-Q, our current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after
we electronically file such reports or amendments with, or furnish them to, the SEC. Our internet website and the information
contained therein or connected thereto are not intended to be incorporated by reference into this Annual Report on Form 10-K.
Also available on our website, free of charge, are copies of our Code of Business Conduct and Ethics, our Corporate Governance
Guidelines, and the charters for each of the committees of our Board of Trustees — the Audit Committee, the Corporate Governance
and Nominating Committee, and the Compensation Committee. Copies of each of these documents are also available in print free of
charge, upon request by any shareholder. You can obtain copies of these documents by contacting Investor Relations by mail at 460
E. Swedesford Road, Suite 3000, Wayne, PA 19087.
ITEM 1A. RISK FACTORS
Overview
An investment in our securities involves various risks. Investors should carefully consider the risks set forth below together with
other information contained in this Annual Report. These risks are not the only ones that we may face. Additional risks not presently
known to us, or that we currently consider immaterial, may also impair our business, financial condition, operating results and ability
to make distributions to our shareholders.
Risks Related to our Business and Operations
Adverse macroeconomic and business conditions may significantly and negatively affect our rental rates, occupancy levels and
therefore our results of operations.
We are susceptible to the effects of adverse macro-economic events that can result in higher unemployment, shrinking demand for
products, large-scale business failures and tight credit markets. Our results of operations are sensitive to changes in overall economic
conditions that impact consumer spending, including discretionary spending, as well as to increased bad debts due to recessionary
pressures. A continuation of, or slow recovery from, ongoing adverse economic conditions affecting disposable consumer income,
such as employment levels, business conditions, interest rates, tax rates, fuel and energy costs, could reduce consumer spending or
cause consumers to shift their spending to other products and services. A general reduction in the level of discretionary spending or
shifts in consumer discretionary spending could adversely affect our growth and profitability.
It is difficult to determine the breadth and duration of the economic and financial market problems and the many ways in which
they may affect our customers and our business in general. Nonetheless, continuation or further worsening of these difficult financial
and macroeconomic conditions could have a significant adverse effect on our sales, profitability and results of operations.
Many states and local jurisdictions are facing severe budgetary problems which may have an adverse impact on our business and
financial results.
Many states and jurisdictions are facing severe budgetary problems. Action that may be taken in response to these problems, such
as increases in property taxes on commercial properties, changes to sales taxes or other governmental efforts, including mandating
medical insurance for employees, could adversely impact our business and results of operations.
Our financial performance is dependent upon the economic and other conditions of the markets in which our facilities are located.
We are susceptible to adverse developments in the markets in which we operate, such as business layoffs or downsizing, industry
slowdowns, relocations of businesses, changing demographics and other factors. Our facilities in New York, Florida, California,
Texas, Illinois, New Jersey, and Tennessee accounted for approximately 16%, 15%, 10%, 10%, 6%, 5% and 4%, respectively, of our
total 2012 revenues. As a result of this geographic concentration of our facilities, we are particularly susceptible to adverse market
conditions in these areas. Any adverse economic or real estate developments in these markets, or in any of the other markets in which
we operate, or any decrease in demand for self-storage space resulting from the local business climate could adversely affect our rental
revenues, which could impair our ability to satisfy our debt service obligations and pay distributions to our shareholders.
We face risks associated with facility acquisitions.
We intend to continue to acquire individual and portfolios of self-storage facilities. These acquisitions would increase our size and
may potentially alter our capital structure. Although we believe that future acquisitions that we complete will enhance our financial
performance, the success of acquisitions is subject to the risks that:
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acquisitions may fail to perform as expected;
the actual costs of repositioning or redeveloping acquired facilities may be higher than our estimates;
we may be unable to obtain acquisition financing on favorable terms;
acquisitions may be located in new markets where we may have limited knowledge and understanding of the local economy,
an absence of business relationships in the area or an unfamiliarity with local governmental and permitting procedures;
there is only limited recourse, or no recourse, to the former owners of newly acquired facilities for unknown or undisclosed
liabilities such as the clean-up of undisclosed environmental contamination; claims by tenants, vendors or other persons
arising on account of actions or omissions of the former owners of the facilities; and claims by local governments, adjoining
property owners, property owner associations, and easement holders for fees, assessments, taxes on other property-related
changes. As a result, if a liability were asserted against us based upon ownership of an acquired facility, we might be
required to pay significant sums to settle it, which could adversely affect our financial results and cash flow.
In addition, we do not always obtain third-party appraisals of acquired facilities (and instead rely on value determinations by our
senior management) and the consideration we pay in exchange for those facilities may exceed the value determined by third-party
appraisals.
We will incur costs and will face integration challenges when we acquire additional facilities.
As we acquire or develop additional self-storage facilities, we will be subject to risks associated with integrating and managing new
facilities, including customer retention and mortgage default risks. In the case of a large portfolio purchase, we could experience
strains in our existing information management capacity. In addition, acquisitions or developments may cause disruptions in our
operations and divert management’s attention away from day-to-day operations. Furthermore, our income may decline because we
will be required to expense acquisition-related costs and amortize in future periods costs for acquired goodwill and other intangible
assets. Our failure to successfully integrate any future acquisitions into our portfolio could have an adverse effect on our operating
costs and our ability to make distributions to our shareholders.
The acquisition of new facilities that lack operating history with us will make it more difficult to predict revenue potential.
We intend to continue to acquire additional facilities. These acquisitions could fail to perform in accordance with expectations. If
we fail to accurately estimate occupancy levels, rental rates, operating costs or costs of improvements to bring an acquired facility up
to the standards established for our intended market position, the performance of the facility may be below expectations. Acquired
facilities may have characteristics or deficiencies affecting their valuation or revenue potential that we have not yet discovered. We
cannot assure you that the performance of facilities acquired by us will increase or be maintained under our management.
We depend on external sources of capital that are outside of our control; the unavailability of capital from external sources could
adversely affect our ability to acquire or develop facilities, satisfy our debt obligations and/or make distributions to shareholders.
We depend on external sources of capital to fund acquisitions and facility development, to satisfy our debt obligations and to make
distributions to our shareholders required to maintain our status as a REIT, and these sources of capital may not be available on
favorable terms, if at all. Our access to external sources of capital depends on a number of factors, including the market’s perception
of our growth potential and our current and potential future earnings and our ability to continue to qualify as a REIT for federal
income tax purposes. If we are unable to obtain external sources of capital, we may not be able to acquire or develop facilities when
strategic opportunities exist, satisfy our debt obligations or make distributions to shareholders that would permit us to qualify as a
REIT or avoid paying tax on our REIT taxable income.
Rising operating expenses could reduce our cash flow and funds available for future distributions.
Our facilities and any other facilities we acquire or develop in the future are and will be subject to operating risks common to real
estate in general, any or all of which may negatively affect us. Our facilities are subject to increases in operating expenses such as real
estate and other taxes, personnel costs including the cost of providing specific medical coverage to our employees, utilities, insurance,
administrative expenses and costs for repairs and maintenance. If operating expenses increase without a corresponding increase in
revenues, our profitability could diminish and limit our ability to make distributions to our shareholders.
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We cannot assure you of our ability to pay dividends in the future.
Historically, we have paid quarterly distributions to our shareholders, and we intend to continue to pay quarterly dividends and to
make distributions to our shareholders in amounts such that all or substantially all of our taxable income in each year, subject to
certain adjustments, is distributed. This, along with other factors, should enable us to continue to qualify for the tax benefits accorded
to a REIT under the Internal Revenue Code. We have not established a minimum dividends payment level, and all future distributions
will be made at the discretion of our Board of Trustees. Our ability to pay dividends will depend upon, among other factors:
the operational and financial performance of our facilities;
capital expenditures with respect to existing and newly acquired facilities;
general and administrative costs associated with our operation as a publicly-held REIT;
maintenance of our REIT status;
the amount of, and the interest rates on, our debt;
the absence of significant expenditures relating to environmental and other regulatory matters; and
other risk factors described in this Annual Report on Form 10-K.
Certain of these matters are beyond our control and any significant difference between our expectations and actual results could have a
material adverse effect on our cash flow and our ability to make distributions to shareholders.
If we are unable to promptly re-let our cubes or if the rates upon such re-letting are significantly lower than expected, then our
business and results of operations would be adversely affected.
We derive revenues principally from rents received from customers who rent cubes at our self-storage facilities under month-to-
month leases. Any delay in re-letting cubes as vacancies arise would reduce our revenues and harm our operating results. In addition,
lower than expected rental rates upon re-letting could adversely affect our revenues and impede our growth.
Property ownership through joint ventures may limit our ability to act exclusively in our interest.
We have in the past co-invested with, and we may continue to co-invest with, third parties through joint ventures. In any such joint
venture, we may not be in a position to exercise sole decision-making authority regarding the facilities owned through joint ventures.
Investments in joint ventures may, under certain circumstances, involve risks not present when a third party is not involved, including
the possibility that joint venture partners might become bankrupt or fail to fund their share of required capital contributions. Joint
venture partners may have business interests or goals that are inconsistent with our business interests or goals and may be in a position
to take actions contrary to our policies or objectives. Such investments also have the potential risk of impasse on strategic decisions,
such as a sale, in cases where neither we nor the joint venture partner would have full control over the joint venture. In other
circumstances, joint venture partners may have the ability without our agreement to make certain major decisions, including decisions
about sales, capital expenditures and/or financing. Any disputes that may arise between us and our joint venture partners could result
in litigation or arbitration that could increase our expenses and distract our officers and/or Trustees from focusing their time and effort
on our business. In addition, we might in certain circumstances be liable for the actions of our joint venture partners, and the activities
of a joint venture could adversely affect our ability to qualify as a REIT, even though we do not control the joint venture.
We face significant competition for tenants and acquisition and development opportunities.
Actions by our competitors may decrease or prevent increases of the occupancy and rental rates of our properties. We compete
with numerous developers, owners and operators of self-storage facilities, including other REITs, some of which own or may in the
future own properties similar to ours in the same submarkets in which our properties are located and some of which may have greater
capital resources. In addition, due to the relatively low cost of each individual self-storage facility, other developers, owners and
operators have the capability to build additional facilities that may compete with our facilities.
If our competitors build new facilities that compete with our facilities or offer space at rental rates below the rental rates we
currently charge our tenants, we may lose potential tenants, and we may be pressured to reduce our rental rates below those we
currently charge in order to retain tenants when our tenants’ leases expire. As a result, our financial condition, cash flow, cash
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available for distribution, market price of our shares and ability to satisfy our debt service obligations could be materially adversely
affected. In addition, increased competition for customers may require us to make capital improvements to our facilities that we
would not have otherwise made. Any unbudgeted capital improvements we undertake may reduce cash available for distributions to
our shareholders.
We also face significant competition for acquisitions and development opportunities. Some of our competitors have greater
financial resources than we do and a greater ability to borrow funds to acquire facilities. These competitors may also be willing to
accept more risk than we can prudently manage, including risks with respect to the geographic proximity of investments and the
payment of higher facility acquisition prices. This competition for investments may reduce the number of suitable investment
opportunities available to us, may increase acquisition costs and may reduce demand for self-storage space in certain areas where our
facilities are located and, as a result, adversely affect our operating results.
We may become subject to litigation or threatened litigation which may divert management’s time and attention, require us to pay
damages and expenses or restrict the operation of our business.
We may become subject to disputes with commercial parties with whom we maintain relationships or other parties with whom we
do business. Any such dispute could result in litigation between us and the other parties. Whether or not any dispute actually
proceeds to litigation, we may be required to devote significant management time and attention to its successful resolution (through
litigation, settlement or otherwise), which would detract from our management’s ability to focus on our business. Any such resolution
could involve the payment of damages or expenses by us, which may be significant. In addition, any such resolution could involve
our agreement with terms that restrict the operation of our business.
There are other commercial parties, at both a local and national level, that may assert that our use of our brand names and other
intellectual property conflict with their rights to use brand names and other intellectual property that they consider to be similar to
ours. Any such commercial dispute and related resolution would involve all of the risks described above, including, in particular, our
agreement to restrict the use of our brand name or other intellectual property.
We also could be sued for personal injuries and/or property damage occurring on our properties. We maintain liability insurance
with limits that we believe adequate to provide for the defense and/or payment of any damages arising from such lawsuits. There can
be no assurance that such coverage will cover all costs and expenses from such suits.
Potential losses may not be covered by insurance, which could result in the loss of our investment in a facility and the future cash
flows from the facility.
We carry comprehensive liability, fire, extended coverage and rental loss insurance covering all of the facilities in our portfolio. We
believe the policy specifications and insured limits are appropriate and adequate given the relative risk of loss, the cost of the coverage
and industry practice. We do not carry insurance for losses such as loss from riots, war or acts of God, and, in some cases, flooding
and environmental hazards, because such coverage is not available or is not available at commercially reasonable rates. Some of our
policies, such as those covering losses due to terrorism, hurricanes, floods and earthquakes, are insured subject to limitations involving
large deductibles or co-payments and policy limits that may not be sufficient to cover losses. If we experience a loss at a facility that
is uninsured or that exceeds policy limits, we could lose the capital invested in that facility as well as the anticipated future cash flows
from that facility. Inflation, changes in building codes and ordinances, environmental considerations, and other factors also might
make it impractical or undesirable to use insurance proceeds to replace a facility after it has been damaged or destroyed. In addition,
if the damaged facilities are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these
facilities were irreparably damaged.
Our insurance coverage may not comply with certain loan requirements.
Certain of our properties serve as collateral for our mortgage-backed debt, some of which we assumed in connection with our
acquisition of facilities and requires us to maintain insurance at levels and on terms that are not commercially reasonable in the current
insurance environment. We may be unable to obtain required insurance coverage if the cost and/or availability make it impractical or
impossible to comply with debt covenants. If we cannot comply with a lender’s requirements, the lender could declare a default,
which could affect our ability to obtain future financing and have a material adverse effect on our results of operations and cash flows
and our ability to obtain future financing. In addition, we may be required to self-insure against certain losses or our insurance costs
may increase.
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Potential liability for environmental contamination could result in substantial costs.
We are subject to federal, state and local environmental regulations that apply generally to the ownership of real property and the
operation of self-storage facilities. If we fail to comply with those laws, we could be subject to significant fines or other governmental
sanctions.
Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate may be required to
investigate and clean up hazardous or toxic substances or petroleum product releases at a facility and may be held liable to a
governmental entity or to third parties for property damage and for investigation and clean-up costs incurred by such parties in
connection with contamination. Such liability may be imposed whether or not the owner or operator knew of, or was responsible for,
the presence of these hazardous or toxic substances. The cost of investigation, remediation or removal of such substances may be
substantial, and the presence of such substances, or the failure to properly remediate such substances, may adversely affect our ability
to sell or rent such facility or to borrow using such facility as collateral. In addition, in connection with the ownership, operation and
management of real properties, we are potentially liable for property damage or injuries to persons and property.
Our practice is to conduct or obtain environmental assessments in connection with the acquisition or development of additional
facilities. We carry environmental insurance coverage on certain properties in our portfolio. We obtain or examine environmental
assessments from qualified and reputable environmental consulting firms (and intend to conduct such assessments prior to the
acquisition or development of additional facilities). The environmental assessments received to date have not revealed, nor do we
have actual knowledge of, any environmental liability that we believe will have a material adverse effect on us. However, we cannot
assure you that our environmental assessments have identified or will identify all material environmental conditions, that any prior
owner of any facility did not create a material environmental condition not actually known to us or that a material environmental
condition does not otherwise exist with respect to any of our facilities.
Americans with Disabilities Act and applicable state accessibility act compliance may require unanticipated expenditures.
Under the Americans with Disabilities Act of 1990 and applicable state accessibility act laws (collectively, the “ADA”), all places
of public accommodation are required to meet federal requirements related to physical access and use by disabled persons. A number
of other federal, state and local laws may also impose access and other similar requirements at our facilities. A failure to comply with
the ADA or similar state or local requirements could result in the governmental imposition of fines or the award of damages to private
litigants affected by the noncompliance. Although we believe that our facilities comply in all material respects with these
requirements (or would be eligible for applicable exemptions from material requirements because of adaptive assistance provided), a
determination that one or more of our facilities is not in compliance with the ADA or similar state or local requirements would result
in the incurrence of additional costs associated with bringing the facilities into compliance. If we are required to make substantial
modifications to comply with the ADA or similar state or local requirements, we may be required to incur significant unanticipated
expenditures, which could have an adverse effect on our operating costs and our ability to make distributions to our shareholders.
Privacy concerns could result in regulatory changes that may harm our business.
Personal privacy has become a significant issue in the jurisdictions in which we operate. Many jurisdictions in which we operate
have imposed restrictions and requirements on the use of personal information by those collecting such information. Changes to law or
regulations affecting privacy, if applicable to our business, could impose additional costs and liability on us and could limit our use
and disclosure of such information.
We face system security risks as we depend upon automated processes and the Internet.
We are increasingly dependent upon automated information technology processes. While we attempt to mitigate this risk through
offsite backup procedures and contracted data centers that include, in some cases, redundant operations, we could still be severely
impacted by a catastrophic occurrence, such as a natural disaster or a terrorist event or cyber-attack. In addition, an increasing portion
of our business operations are conducted over the Internet, increasing the risk of viruses that could cause system failures and
disruptions of operations despite our deployment of anti-virus measures. Experienced computer programmers may be able to
penetrate our network security and misappropriate our confidential information, create system disruptions or cause shutdowns.
16
Terrorist attacks and other acts of violence or war may adversely impact our performance and may affect the markets on which
our securities are traded.
Terrorist attacks against our facilities, the United States or our interests, may negatively impact our operations and the value of our
securities. Attacks or armed conflicts could negatively impact the demand for self-storage facilities and increase the cost of insurance
coverage for our facilities, which could reduce our profitability and cash flow. Furthermore, any terrorist attacks or armed conflicts
could result in increased volatility in or damage to the United States and worldwide financial markets and economy.
Risks Related to the Real Estate Industry
Our performance and the value of our self-storage facilities are subject to risks associated with our properties and with the real
estate industry.
Our rental revenues and operating costs and the value of our real estate assets, and consequently the value of our securities, are
subject to the risk that if our facilities do not generate revenues sufficient to meet our operating expenses, including debt service and
capital expenditures, our cash flow and ability to pay distributions to our shareholders will be adversely affected. Events or conditions
beyond our control that may adversely affect our operations or the value of our facilities include but are not limited to:
downturns in the national, regional and local economic climate;
local or regional oversupply, increased competition or reduction in demand for self-storage space;
vacancies or changes in market rents for self-storage space;
inability to collect rent from customers;
increased operating costs, including maintenance, insurance premiums and real estate taxes;
changes in interest rates and availability of financing;
hurricanes, earthquakes and other natural disasters, civil disturbances, terrorist acts or acts of war that may result in uninsured
or underinsured losses;
significant expenditures associated with acquisitions and development projects, such as debt service payments, real estate
taxes, insurance and maintenance costs which are generally not reduced when circumstances cause a reduction in revenues
from a property;
costs of complying with changes in laws and governmental regulations, including those governing usage, zoning, the
environment and taxes; and
the relative illiquidity of real estate investments.
In addition, prolonged periods of economic slowdown or recession, rising interest rates or declining demand for self-storage, or the
public perception that any of these events may occur, could result in a general decline in rental revenues, which could impair our
ability to satisfy our debt service obligations and to make distributions to our shareholders.
Rental revenues are significantly influenced by demand for self-storage space generally, and a decrease in such demand would
likely have a greater adverse effect on our rental revenues than if we owned a more diversified real estate portfolio.
Because our portfolio of facilities consists primarily of self-storage facilities, we are subject to risks inherent in investments in a
single industry. A decrease in the demand for self-storage space would have a greater adverse effect on our rental revenues than if we
owned a more diversified real estate portfolio. Demand for self-storage space has been and could be adversely affected by ongoing
weakness in the national, regional and local economies, changes in supply of, or demand for, similar or competing self-storage
facilities in an area and the excess amount of self-storage space in a particular market. To the extent that any of these conditions occur,
they are likely to affect market rents for self-storage space, which could cause a decrease in our rental revenue. Any such decrease
could impair our ability to satisfy debt service obligations and make distributions to our shareholders.
17
Because real estate is illiquid, we may not be able to sell properties when appropriate.
Real estate property investments generally cannot be sold quickly. Also, the tax laws applicable to REITs require that we hold our
facilities for investment, rather than sale in the ordinary course of business, which may cause us to forgo or defer sales of facilities that
otherwise would be in our best interest. Therefore, we may not be able to dispose of facilities promptly, or on favorable terms, in
response to economic or other market conditions, which may adversely affect our financial position.
Risks Related to our Qualification and Operation as a REIT
Failure to qualify as a REIT would subject us to U.S. federal income tax which would reduce the cash available for distribution to
our shareholders.
We operate our business to qualify to be taxed as a REIT for federal income tax purposes. We have not requested and do not plan
to request a ruling from the IRS that we qualify as a REIT, and the statements in this Annual Report on Form 10-K are not binding on
the IRS or any court. As a REIT, we generally will not be subject to federal income tax on the income that we distribute currently to
our shareholders. Many of the REIT requirements, however, are highly technical and complex.
The determination that we are a REIT requires an analysis of various factual matters and circumstances that may not be totally within
our control. For example, to qualify as a REIT, at least 95% of our gross income must come from specific passive sources, such as
rent, that are itemized in the REIT tax laws. In addition, to qualify as a REIT, we cannot own specified amounts of debt and equity
securities of some issuers. We also are required to distribute to our shareholders with respect to each year at least 90% of our REIT
taxable income, excluding net capital gains. The fact that we hold substantially all of our assets through the Operating Partnership and
its subsidiaries further complicates the application of the REIT requirements for us. Even a technical or inadvertent mistake could
jeopardize our REIT status and, given the highly complex nature of the rules governing REITs and the ongoing importance of factual
determinations, we cannot provide any assurance that we will continue to qualify as a REIT. Furthermore, Congress and the IRS
might make changes to the tax laws and regulations, and the courts might issue new rulings, that make it more difficult, or impossible,
for us to remain qualified as a REIT. If we fail to qualify as a REIT for federal income tax purposes and are able to avail ourselves of
one or more of the statutory savings provisions in order to maintain our REIT status, we would nevertheless be required to pay penalty
taxes of $50,000 or more for each such failure.
If we fail to qualify as a REIT for federal income tax purposes, and are unable to avail ourselves of certain savings provisions set
forth in the Internal Revenue Code, we would be subject to federal income tax at regular corporate rates on all of our income. As a
taxable corporation, we would not be allowed to take a deduction for distributions to shareholders in computing our taxable income or
pass through long term capital gains to individual shareholders at favorable rates. We also could be subject to the federal alternative
minimum tax and possibly increased state and local taxes. We would not be able to elect to be taxed as a REIT for four years
following the year we first failed to qualify unless the IRS were to grant us relief under certain statutory provisions. If we failed to
qualify as a REIT, we would have to pay significant income taxes, which would reduce our net earnings available for investment or
distribution to our shareholders. This likely would have a significant adverse effect on our earnings and likely would adversely affect
the value of our securities. In addition, we would no longer be required to pay any distributions to shareholders.
Failure of the Operating Partnership (or a subsidiary partnership) to be treated as a partnership would have serious adverse
consequences to our shareholders.
If the IRS were to successfully challenge the tax status of the Operating Partnership or any of its subsidiary partnerships for federal
income tax purposes, the Operating Partnership or the affected subsidiary partnership would be taxable as a corporation. In such event
we would cease to qualify as a REIT and the imposition of a corporate tax on the Operating Partnership or a subsidiary partnership
would reduce the amount of cash available for distribution from the Operating Partnership to us and ultimately to our shareholders.
To maintain our REIT status, we may be forced to borrow funds on a short term basis during unfavorable market conditions.
As a REIT, we are subject to certain distribution requirements, including the requirement to distribute 90% of our REIT taxable
income, which may result in our having to make distributions at a disadvantageous time or to borrow funds at unfavorable rates.
Compliance with this requirement may hinder our ability to operate solely on the basis of maximizing profits.
We will pay some taxes even if we qualify as a REIT, which will reduce the cash available for distribution to our shareholders.
Even if we qualify as a REIT for federal income tax purposes, we will be required to pay certain federal, state and local taxes on our
income and property. For example, we will be subject to income tax to the extent we distribute less than 100% of our REIT taxable
income, including capital gains. Additionally, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which
18
dividends paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income
and 100% of our undistributed income from prior years. Moreover, if we have net income from “prohibited transactions,” that income
will be subject to a 100% penalty tax. In general, prohibited transactions are sales or other dispositions of property held primarily for
sale to customers in the ordinary course of business. The determination as to whether a particular sale is a prohibited transaction
depends on the facts and circumstances related to that sale.
We cannot guarantee that sales of our properties would not be prohibited transactions unless we comply with certain statutory safe-
harbor provisions.
In addition, any net taxable income earned directly by our taxable REIT subsidiaries, or through entities that are disregarded for
federal income tax purposes as entities separate from our taxable REIT subsidiaries, will be subject to federal and possibly state
corporate income tax. We have elected to treat some of our subsidiaries as taxable REIT subsidiaries, and we may elect to treat other
subsidiaries as taxable REIT subsidiaries in the future. In this regard, several provisions of the laws applicable to REITs and their
subsidiaries ensure that a taxable REIT subsidiary will be subject to an appropriate level of federal income taxation. For example, a
taxable REIT subsidiary is limited in its ability to deduct certain interest payments made to an affiliated REIT. In addition, the REIT
has to pay a 100% penalty tax on some payments that it receives or on some deductions taken by a taxable REIT subsidiary if the
economic arrangements between the REIT, the REIT’s customers, and the taxable REIT subsidiary are not comparable to similar
arrangements between unrelated parties. Finally, some state and local jurisdictions may tax some of our income even though as a
REIT we are not subject to federal income tax on that income because not all states and localities follow the federal income tax
treatment of REITs. To the extent that we and our affiliates are required to pay federal, state and local taxes, we will have less cash
available for distributions to our shareholders.
We face possible federal, state and local tax audits.
Because we are organized and qualify as a REIT, we are generally not subject to federal income taxes, but are subject to certain
state and local taxes. Certain entities through which we own real estate either have undergone, or are currently undergoing, tax audits.
Although we believe that we have substantial arguments in favor of our positions in the ongoing audits, in some instances there is no
controlling precedent or interpretive guidance on the specific point at issue. Collectively, tax deficiency notices received to date from
the jurisdictions conducting the ongoing audits have not been material. However, there can be no assurance that future audits will not
occur with increased frequency or that the ultimate result of such audits will not have a material adverse effect on our results of
operations.
Risks Related to our Debt Financings
We face risks related to current debt maturities, including refinancing risk.
Certain of our mortgages, bank loans, and unsecured debt (including our senior notes) will have significant outstanding balances on
their maturity dates, commonly known as “balloon payments.” We may not have the cash resources available to repay those amounts,
and we may have to raise funds for such repayment either through the issuance of equity or debt securities, additional bank borrowings
(which may include extension of maturity dates), joint ventures or asset sales. Furthermore, we are restricted from incurring certain
additional indebtedness and making certain other changes to our capital and debt structure under the terms of the senior notes and the
indenture governing the senior notes.
There can be no assurance that we will be able to refinance our debt on favorable terms or at all. To the extent we cannot refinance
debt on favorable terms or at all, we may be forced to dispose of properties on disadvantageous terms or pay higher interest rates,
either of which would have an adverse impact on our financial performance and ability to pay dividends to investors
As a result of our interest rate hedges, swap agreements and other, similar arrangements, we face counterparty risks.
We may be exposed to the potential risk of counterparty default or non-payment with respect to interest rate hedges, swap
agreements, floors, caps and other interest rate hedging contracts that we may enter into from time to time, in which event we could
suffer a material loss on the value of those agreements. Although these agreements may lessen the impact of rising interest rates on
us, they also expose us to the risk that other parties to the agreements will not perform or that we cannot enforce the agreements.
There is no assurance that our potential counterparties on these agreements will perform their obligations under such agreements.
19
Financing our future growth plan or refinancing existing debt maturities could be impacted by negative capital market conditions.
Recently, domestic financial markets have experienced extreme volatility and uncertainty. At times in recent years liquidity has
tightened in the domestic financial markets, including the investment grade debt and equity capital markets for which we historically
sought financing. Consequently, there is greater uncertainty regarding our ability to access the credit markets in order to attract
financing on reasonable terms nor can there be any assurance we can issue common or preferred equity securities at a reasonable
price. Our ability to finance new acquisitions and refinance future debt maturities could be adversely impacted by our inability to
secure permanent financing on reasonable terms, if at all.
The terms and covenants relating to our indebtedness could adversely impact our economic performance.
Like other real estate companies that incur debt, we are subject to risks associated with debt financing, such as the insufficiency of
cash flow to meet required debt service payment obligations and the inability to refinance outstanding indebtedness at maturity. If our
debt cannot be paid, refinanced or extended at maturity, we may not be able to make distributions to shareholders at expected levels or
at all and may not be able to acquire new properties. Failure to make distributions to our shareholders could result in our failure to
qualify as a REIT for federal income tax purposes. Furthermore, an increase in our interest expense could adversely affect our cash
flow and ability to make distributions to shareholders. If we do not meet our debt service obligations, any facilities securing such
indebtedness could be foreclosed on, which would have a material adverse effect on our cash flow and ability to make distributions
and, depending on the number of facilities foreclosed on, could threaten our continued viability.
Our 2012 Credit Facility contains (and any new or amended facility we may enter into from time to time will likely contain)
customary affirmative and negative covenants, including financial covenants that, among other things, require us to comply with
certain liquidity and net worth tests. Our ability to borrow under the 2012 Credit Facility is (and any new or amended facility we may
enter into from time to time will be) subject to compliance with such financial and other covenants. In the event that we fail to satisfy
these covenants, we would be in default under the 2012 Credit Facility and may be required to repay such debt with capital from other
sources. Under such circumstances, other sources of debt or equity capital may not be available to us, or may be available only on
unattractive terms. Moreover, the presence of such covenants in our credit agreements could cause us to operate our business with a
view toward compliance with such covenants, which might not produce optimal returns for shareholders.
Increases in interest rates on variable rate indebtedness would increase our interest expense, which could adversely affect our cash
flow and ability to make distributions to shareholders. Rising interest rates could also restrict our ability to refinance existing debt
when it matures. In addition, an increase in interest rates could decrease the amounts that third parties are willing to pay for our
assets, thereby limiting our ability to alter our portfolio promptly in relation to economic or other conditions.
Our organizational documents contain no limitation on the amount of debt we may incur. As a result, we may become highly
leveraged in the future.
Our organizational documents do not limit the amount of indebtedness that we or our Operating Partnership may incur. We could
alter the balance between our total outstanding indebtedness and the value of our assets at any time. If we become more highly
leveraged, then the resulting increase in debt service could adversely affect our ability to make payments on our outstanding
indebtedness and to pay our anticipated distributions and/or the distributions required to maintain our REIT status, and could harm our
financial condition.
Risks Related to our Organization and Structure
We are dependent upon our senior management team whose continued service is not guaranteed.
Our executive team, including our named executive officers, has extensive self-storage, real estate and public company experience.
Although we have employment agreements with members of our senior management team, we cannot provide any assurance that any
of them will remain in our employment. The loss of services of one or more members of our senior management team could adversely
affect our operations and our future growth.
We are dependent upon our on-site personnel to maximize customer satisfaction; any difficulties we encounter in hiring, training
and retaining skilled field personnel may adversely affect our rental revenues.
As of December 31, 2012, we had 1,221 field personnel involved in the management and operation of our facilities. The customer
service, marketing skills and knowledge of local market demand and competitive dynamics of our facility managers are contributing
factors to our ability to maximize our rental income and to achieve the highest sustainable rent levels at each of our facilities. We
20
compete with various other companies in attracting and retaining qualified and skilled personnel. Competitive pressures may require
that we enhance our pay and benefits package to compete effectively for such personnel. If there is an increase in these costs or if we
fail to attract and retain qualified and skilled personnel, our business and operating results could be harmed.
Certain provisions of Maryland law could inhibit changes in control, which may discourage third parties from conducting a tender
offer or seeking other change of control transactions that could involve a premium price for our shares or otherwise benefit our
shareholders.
Certain provisions of Maryland law may have the effect of inhibiting a third party from making a proposal to acquire us or of
impeding a change of control under circumstances that otherwise could provide the holders of our common shares with the
opportunity to realize a premium over the then-prevailing market price of those shares, including:
“business combination moratorium/fair price” provisions that, subject to limitations, prohibit certain business combinations
between us and an “interested shareholder” (defined generally as any person who beneficially owns 10% or more of the voting
power of our shares or an affiliate thereof) for five years after the most recent date on which the shareholder becomes an
interested shareholder, and thereafter imposes stringent fair price and super-majority shareholder voting requirements on these
combinations; and
“control share” provisions that provide that “control shares” of our company (defined as shares which, when aggregated with
other shares controlled by the shareholder, entitle the shareholder to exercise one of three increasing ranges of voting power in
electing Trustees) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control
of “control shares” from a party other than the issuer) have no voting rights except to the extent approved by our shareholders by
the affirmative vote of at least two thirds of all the votes entitled to be cast on the matter, excluding all interested shares, and are
subject to redemption in certain circumstances.
We have opted out of these provisions of Maryland law. However, our Board of Trustees may opt to make these provisions
applicable to us at any time without shareholder approval.
Our Trustees also have the discretion, granted in our bylaws and Maryland law, without shareholder approval to, among other things
(1) create a staggered Board of Trustees, and (2) amend our bylaws or repeal individual bylaws in a manner that provides the Board of
Trustees with greater authority. Any such action could inhibit or impede a third party from making a proposal to acquire us at a price
that could be beneficial to our shareholders.
Our shareholders have limited control to prevent us from making any changes to our investment and financing policies.
Our Board of Trustees has adopted policies with respect to certain activities. These policies may be amended or revised from time
to time at the discretion of our Board of Trustees without a vote of our shareholders. This means that our shareholders have limited
control over changes in our policies. Such changes in our policies intended to improve, expand or diversify our business may not have
the anticipated effects and consequently may adversely affect our business and prospects, results of operations and share price.
Our rights and the rights of our shareholders to take action against our Trustees and officers are limited.
Maryland law provides that a trustee or officer has no liability in that capacity if he or she performs his or her duties in good faith,
in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like
position would use under similar circumstances. Our declaration of trust and bylaws require us to indemnify our Trustees and officers
for actions taken on behalf of the Company by them in those capacities to the extent permitted by Maryland law. Accordingly, in the
event that actions taken in good faith by any Trustee or officer impede our performance, our shareholders’ ability to recover damages
from that Trustee or officer will be limited.
Our declaration of trust permits our Board of Trustees to issue preferred shares with terms that may discourage third parties from
conducting a tender offer or seeking other change of control transactions that could involve a premium price for our shares or
otherwise benefit our shareholders.
Our declaration of trust permits our Board of Trustees to issue up to 40,000,000 preferred shares, of which 3,100,000 shares have
already been issued, having those preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions,
qualifications, or terms or conditions of redemption as determined by our Board. In addition, our Board may reclassify any unissued
common shares into one or more classes or series of preferred shares. Thus, our Board could authorize, without shareholder approval,
the issuance of preferred shares with terms and conditions that could have the effect of discouraging a takeover or other transaction in
which holders of some or a majority of our shares might receive a premium for their shares over the then-prevailing market price of
21
our shares. We currently do not expect that the Board would require shareholder approval prior to such a preferred issuance. In
addition, any preferred shares that we issue would rank senior to our common shares with respect to the payment of distributions, in
which case we could not pay any distributions on our common shares until full distributions have been paid with respect to such
preferred shares.
Risks Related to our Securities
Additional issuances of equity securities may be dilutive to shareholders.
The interests of our shareholders could be diluted if we issue additional equity securities to finance future acquisitions or
developments or to repay indebtedness. Our Board of Trustees may authorize the issuance of additional equity securities, including
preferred shares, without shareholder approval. Our ability to execute our business strategy depends upon our access to an appropriate
blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing,
including common and preferred equity.
Many factors could have an adverse effect on the market value of our securities.
A number of factors might adversely affect the price of our securities, many of which are beyond our control. These factors include:
increases in market interest rates, relative to the dividend yield on our shares. If market interest rates go up, prospective
purchasers of our securities may require a higher yield. Higher market interest rates would not, however, result in more
funds for us to distribute and, to the contrary, would likely increase our borrowing costs and potentially decrease funds
available for distribution. Thus, higher market interest rates could cause the market price of our equity securities to go down;
anticipated benefit of an investment in our securities as compared to investment in securities of companies in other industries
(including benefits associated with tax treatment of dividends and distributions);
perception by market professionals of REITs generally and REITs comparable to us in particular;
level of institutional investor interest in our securities;
relatively low trading volumes in securities of REITs;
our results of operations and financial condition;
investor confidence in the stock market generally; and
additions and departures of key personnel.
The market value of our equity securities is based primarily upon the market’s perception of our growth potential and our current
and potential future earnings and cash distributions. Consequently, our equity securities may trade at prices that are higher or lower
than our net asset value per equity security. If our future earnings or cash distributions are less than expected, it is likely that the
market price of our equity securities will diminish.
The market price of our common shares has been, and may continue to be, particularly volatile, and our shareholders may be
unable to resell their shares at a profit.
The market price of our common shares has been subject to significant fluctuations and may continue to fluctuate or decline.
Between 2010 and December 31, 2012, the price of our common shares has been volatile, ranging from a high of $14.74 (on
December 24, 2012) to a low of $6.14 (on February 25, 2010). In the past several years, REIT securities have experienced high levels
of volatility and significant declines in value from their historic highs.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often
been brought against that company. If our stock price is volatile, we may become the target of securities litigation. Securities
litigation could result in substantial costs and divert our management’s attention and resources from our business.
22
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Overview
As of December 31, 2012, we owned 381 self-storage facilities located in 22 states and the District of Columbia; and aggregating
approximately 25.5 million rentable square feet. The following table sets forth certain summary information regarding our facilities
by state as of December 31, 2012.
State
Florida ................................................
Texas ..................................................
California ...........................................
New York ...........................................
Illinois ................................................
Arizona ..............................................
Tennessee ...........................................
New Jersey .........................................
Connecticut ........................................
Georgia .............................................
Ohio ...................................................
Virginia ..............................................
Colorado ............................................
Maryland ............................................
North Carolina ...................................
Pennsylvania ......................................
Utah....................................................
Massachusetts ....................................
New Mexico .......................................
Washington DC ..................................
Nevada ...............................................
Indiana ...............................................
Wisconsin ..........................................
Total/Weighted Average ..............
Number of
Facilities
Number of
Units
Total
Rentable
Square Feet
% of Total
Rentable
Square Feet
Occupancy
55
53
43
30
27
24
23
21
20
16
15
9
9
6
6
7
4
4
3
2
2
1
1
381
38,802
25,859
26,196
34,219
13,829
11,931
12,327
13,418
9,089
9,645
8453
6,722
4,755
5,117
3,873
4,829
2,207
2,379
1,620
1,799
885
713
486
239,153
4,076,940
3,258,014
3,099,697
2,127,114
1,607,406
1,283,093
1,606,973
1,386,285
1,041,681
1,182,150
979,849
692,015
567,556
596,912
463,062
513,880
239,623
206,419
182,061
145,615
97,446
73,014
58,500
25,485,304
16.0%
12.8%
12.2%
8.4%
6.3%
5.0%
6.3%
5.4%
4.1%
4.6%
3.8%
2.7%
2.2%
2.3%
1.8%
2.0%
0.9%
0.8%
0.7%
0.6%
0.4%
0.4%
0.3%
100.0%
85.0%
83.8%
82.9%
84.7%
88.0%
83.5%
84.0%
81.9%
85.0%
83.9%
86.1%
83.9%
87.2%
84.4%
82.2%
84.5%
87.5%
81.9%
85.3%
92.8%
85.6%
86.6%
81.2%
84.4%
23
Our Facilities
The following table sets forth certain additional information with respect to each of our facilities as of December 31, 2012. Our
ownership of each facility consists of a fee interest in the facility held by our Operating Partnership, or one of its subsidiaries, except
for five of our facilities, which are subject to ground leases. In addition, small parcels of land at four of our other facilities are subject
to ground leases.
Facility Location
Chandler, AZ .........
Glendale, AZ ..........
Green Valley, AZ ...
Mesa I, AZ .............
Mesa II, AZ ............
Mesa III, AZ ..........
Phoenix I, AZ .........
Phoenix II, AZ .......
Scottsdale, AZ ........
Tempe, AZ .............
Tucson I, AZ ..........
Tucson II, AZ .........
Tucson III, AZ .......
Tucson IV, AZ .......
Tucson V, AZ ........
Tucson VI, AZ .......
Tucson VII, AZ ......
Tucson VIII, AZ ....
Tucson IX, AZ .......
Tucson X, AZ ........
Tucson XI, AZ .......
Tucson XII, AZ ......
Tucson XIII, AZ ....
Tucson XIV, AZ ....
Apple Valley I, CA
Apple Valley II, CA
Benicia, CA ............
Cathedral City, CA †
Citrus Heights, CA .
Diamond Bar, CA ..
Escondido, CA .......
Fallbrook, CA ........
Lancaster, CA ........
Long Beach, CA ....
Murrieta, CA ..........
North Highlands, CA
Orangevale, CA .....
Palm Springs I, CA
Palm Springs II, CA †
Pleasanton, CA .......
Rancho Cordova, CA
Rialto I, CA ............
Rialto II, CA ..........
Riverside I, CA ......
Riverside II, CA .....
Roseville, CA .........
Sacramento I, CA ...
Sacramento II, CA .
San Bernardino I, CA
Year Acquired/
Developed (1)
2005
1998
2005
2006
2006
2006
2006
2006
1998
2005
1998
1998
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
1997
1997
2005
2006
2005
2005
2007
1997
2001
2006
2005
2005
2005
2006
2006
2005
2005
2006
1997
2006
2006
2005
2005
2005
1997
Year
Built
1985
1987
1985
1985
1981
1986
1987
1974
1995
1975
1974
1988
1979
1982
1982
1982
1982
1979
1984
1981
1974
1974
1974
1976
1984
1988
1988/93/05
1982/92
1987
1988
2002
1985/88
1987
1974
1996
1980
1980
1989
1982/89
2003
1979
1987
1980
1977
1985
1979
1979
1986
1987
Occupancy (2)
85.7%
85.2%
77.0%
87.9%
82.2%
74.3%
86.4%
82.3%
82.0%
84.4%
79.9%
89.1%
76.9%
81.4%
83.3%
86.5%
85.4%
89.4%
85.4%
81.6%
80.1%
84.6%
80.2%
89.0%
83.3%
76.3%
82.5%
83.3%
85.2%
91.4%
90.9%
81.9%
71.2%
68.9%
88.8%
85.5%
83.5%
82.9%
77.8%
87.1%
87.2%
84.7%
75.4%
83.6%
67.8%
85.3%
86.1%
70.9%
86.5%
Rentable
Square Feet
47,520
56,807
25,050
52,375
45,361
58,189
100,775
83,309
79,525
53,890
59,350
43,950
49,832
48,040
45,184
40,766
52,688
46,600
67,720
46,350
42,700
42,225
45,792
49,095
73,290
61,405
74,770
110,974
75,620
102,984
142,670
46,620
60,675
125,091
49,835
57,244
50,317
72,675
122,550
85,045
53,978
57,391
99,803
67,120
85,166
59,869
50,714
61,888
31,070
24
Units
Manager
Apartment (3)
431
515
258
485
391
492
750
793
657
404
485
532
482
483
418
412
590
441
600
411
413
428
512
548
495
428
731
624
671
900
1,219
447
327
1,351
424
469
530
535
579
693
453
437
716
635
815
545
538
549
232
Y
Y
N
N
Y
Y
Y
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
N
% Climate
Controlled (4)
6.9%
0.0%
8.0%
0.0%
9.8%
4.5%
9.0%
2.6%
9.7%
13.0%
0.0%
100.0%
0.0%
3.7%
3.0%
3.4%
2.0%
0.0%
1.9%
0.0%
0.0%
4.8%
0.0%
8.8%
0.0%
5.3%
0.0%
2.2%
0.0%
0.0%
6.5%
0.0%
0.0%
0.0%
2.9%
0.0%
0.0%
0.0%
8.5%
0.0%
0.0%
0.0%
0.0%
0.0%
3.9%
0.0%
0.0%
0.0%
0.0%
Facility Location
San Bernardino II, CA
San Bernardino III, CA
San Bernardino IV, CA
San Bernardino V, CA
San Bernardino VII, CA
San Bernardino VIII, CA
San Marcos, CA .....
Santa Ana, CA .......
South Sacramento, CA
Spring Valley, CA
Temecula I, CA ......
Temecula II, CA ....
Thousand Palms, CA
Vista I, CA .............
Vista II, CA ............
Walnut, CA ............
West Sacramento, CA
Westminster, CA ....
Aurora, CO ............
Colorado Springs I, CO
Colorado Springs II, CO
Denver I, CO ..........
Denver II, CO ........
Federal Heights, CO
Year Acquired/
Developed (1)
1997
1997
2005
2006
2006
2006
2005
2006
2005
2006
1998
2007
2006
2001
2005
2005
2005
2005
2005
2005
2006
2006
2012
2005
Year
Built
1991
1985/92
2002/04
1974
1978
1977
1979
1984
1979
1980
1985/2003
2003
1988/01
1988
2001/02/03
1987
1984
1983/98
1981
1986
2001
1997
2007
1980
Rentable
Square Feet
41,546
35,341
83,166
57,001
78,729
95,029
37,430
63,896
52,165
55,045
81,550
84,398
74,305
74,405
148,081
50,708
40,040
68,098
75,867
47,925
62,300
59,200
74,520
54,770
Occupancy (2)
73.1%
83.7%
85.4%
92.9%
92.7%
80.6%
91.0%
89.8%
81.0%
80.7%
82.9%
83.6%
89.9%
86.7%
80.3%
84.6%
85.0%
86.1%
87.8%
85.5%
83.1%
90.4%
85.8%
84.7%
Units
Manager
Apartment (3)
373
373
688
466
604
816
242
712
411
713
687
630
674
621
1,270
537
478
558
613
462
433
449
675
544
Y
N
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
Y
% Climate
Controlled (4)
0.0%
0.0%
11.6%
4.2%
1.3%
0.0%
0.0%
2.0%
0.0%
0.0%
46.5%
51.3%
27.2%
0.0%
2.3%
9.2%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
91.0%
0.0%
25
Facility Location
Golden, CO ...........
Littleton, CO .........
Northglenn, CO .....
Bloomfield, CT .....
Branford, CT .........
Bristol, CT ............
East Windsor, CT
Enfield, CT ...........
Gales Ferry, CT .....
Manchester I, CT (6)
Manchester II, CT
Milford, CT ...........
Monroe, CT ...........
Mystic, CT ............
Newington I, CT ...
Newington II, CT ..
Norwalk, CT .........
Old Saybrook I, CT
Old Saybrook II, CT
Shelton, CT ...........
South Windsor, CT
Stamford, CT ........
Wilton, CT ............
Washington I, DC
Washington II, DC
Boca Raton, FL .....
Boynton Beach I, FL
Boynton Beach II, FL
Bradenton I, FL .....
Bradenton II, FL ...
Cape Coral, FL ......
Coconut Creek, FL
Dania, FL ..............
Dania Beach, FL (6)
Davie, FL ..............
Deerfield Beach, FL
Delray Beach, FL ..
Fernandina Beach, FL
Ft. Lauderdale, FL
Ft. Myers, FL ........
Jacksonville I, FL
Jacksonville II, FL
Jacksonville III, FL
Jacksonville IV, FL
Jacksonville V, FL
Kendall, FL ...........
Lake Worth, FL †
Lakeland I, FL .......
Lutz I, FL ..............
Lutz II, FL .............
Margate I, FL † .....
Margate II, FL † ....
Merrit Island, FL ...
Miami I, FL ...........
Year Acquired/
Developed (1)
Year
Built
1985
1987
1980
1987/93/94
1986
1989/99
1986/89
1989
1987/89
1999/00/01
1984
1975
1996/03
1975/86
1978/97
1979/81
2009
1982/88/00
1988/02
2007
1976
1997
1966
2002
1929/98
1998
1999
2001
1979
1996
2000
2001
1988
1984
2001
1998
1999
1986
1999
1998
2005
2004
2003
2006
2004
2003
1998/02
1988
2000
1999
1979/81
1985
2000
1995
2005
2005
2005
1997
1995
2005
2005
2001
1995
2002
2005
1996
2005
1996
2005
2005
2012
2005
2005
2011
1996
2005
2012
2008
2011
2001
2001
2005
2004
2004
2000*
2012
1996
2004
2001*
1998*
2001
1996
1999
1999
2005
2007
2007
2007
2007
2007
1998
1994
2004
2004
1996
1996
2002
1996
Units
Manager
Apartment (3)
640
442
497
438
434
453
301
366
597
455
399
376
399
560
246
195
351
720
253
857
558
362
769
754
1,045
605
755
578
585
849
855
756
492
1,836
832
517
819
784
695
589
705
657
675
705
695
703
1,355
487
594
531
338
424
465
560
Y
Y
Y
Y
Y
N
N
Y
N
N
N
Y
N
Y
N
N
N
N
N
Y
Y
N
Y
Y
N
N
Y
Y
N
Y
Y
N
Y
N
Y
Y
Y
Y
Y
Y
N
N
N
N
N
N
Y
Y
Y
Y
N
Y
Y
Y
% Climate
Controlled (4)
1.2%
37.4%
0.0%
6.6%
2.2%
22.4%
0.0%
0.0%
6.5%
37.5%
0.0%
4.0%
0.0%
2.3%
0.0%
0.0%
100.0%
5.9%
54.2%
85.7%
1.1%
32.8%
54.8%
96.5%
99.0%
68.2%
54.1%
82.3%
2.7%
40.0%
83.6%
48.1%
26.9%
21.5%
55.7%
38.9%
39.3%
35.3%
46.8%
67.1%
100.0%
100.0%
100.0%
100.0%
82.3%
71.0%
37.2%
79.4%
36.9%
20.6%
9.9%
28.8%
56.7%
52.1%
Occupancy (2)
91.5%
87.8%
86.0%
87.1%
84.3%
88.9%
78.6%
88.8%
75.6%
81.4%
87.9%
91.6%
85.7%
86.2%
86.1%
85.2%
97.3%
86.8%
90.9%
80.6%
77.1%
87.9%
85.4%
93.7%
92.1%
89.1%
87.6%
79.8%
80.3%
86.2%
82.9%
89.8%
92.8%
70.1%
87.2%
92.7%
85.6%
84.2%
91.4%
69.7%
95.0%
85.0%
87.9%
90.6%
82.4%
91.0%
92.1%
75.4%
80.2%
86.0%
83.5%
78.5%
82.0%
93.9%
Rentable
Square Feet
87,382
53,490
52,102
48,700
50,679
47,725
46,016
52,875
54,230
47,025
52,725
44,885
58,700
50,725
42,620
36,140
31,239
86,950
26,425
78,465
72,125
28,957
84,475
63,085
82,530
37,958
61,749
61,703
68,391
87,960
76,627
78,783
58,270
168,217
80,985
57,230
67,813
110,995
70,063
67,510
80,296
65,270
65,580
77,425
81,835
75,395
161,808
49,111
66,795
69,232
54,165
65,186
50,417
46,825
26
Facility Location
Miami II, FL .........
Miami III, FL ........
Miami IV, FL ........
Naples I, FL ..........
Naples II, FL .........
Naples III, FL ........
Naples IV, FL .......
Ocoee, FL .............
Orange City, FL ....
Orlando II, FL .......
Orlando III, FL ......
Orlando IV, FL .....
Orlando V, FL .......
Oviedo, FL ............
Pembroke Pines, FL
Royal Palm Beach II, FL
Sanford, FL ...........
Sarasota, FL ..........
St. Augustine, FL ..
Year Acquired/
Developed (1)
1996
2005
2011
1996
1997
1997
1998
2005
2004
2005
2006
2010
2012
2006
1997
2007
2006
1999
1996
Year
Built
1989
1988/03
2007
1996
1985
1981/83
1990
1997
2001
2002/04
1988/90/96
2009
2008
1988/1991
1997
2004
1988/2006
1998
1985
Rentable
Square Feet
67,010
150,735
76,352
48,150
65,850
80,266
40,600
76,250
59,586
63,084
102,705
76,565
75,359
49,251
67,321
81,405
61,810
71,402
59,725
Occupancy (2)
80.2%
86.0%
90.0%
93.5%
90.7%
89.5%
92.2%
80.2%
84.2%
85.9%
77.2%
89.0%
86.3%
80.5%
88.5%
90.5%
86.9%
79.9%
76.6%
Units
Manager
Apartment (3)
568
1,518
932
319
627
797
428
620
639
577
784
637
638
427
696
759
437
524
699
Y
N
N
Y
Y
Y
N
Y
N
N
Y
N
N
Y
Y
N
Y
Y
Y
% Climate
Controlled (4)
7.9%
86.9%
100.0%
26.6%
44.6%
23.7%
42.2%
15.5%
39.1%
74.2%
12.4%
64.4%
85.3%
3.2%
63.2%
82.3%
28.6%
42.3%
29.9%
27
Facility Location
Stuart, FL .................
SW Ranches, FL ......
Tampa, FL ................
West Palm Beach I, FL
West Palm Beach II, FL
West Palm Beach III, FL
Alpharetta, GA .........
Atlanta, GA ..............
Austell , GA .............
Decatur, GA .............
Duluth II, GA ...........
Duluth, GA ..............
Lawrenceville, GA ...
Leisure City, GA ......
Norcross I, GA .........
Norcross II, GA ........
Norcross II, GA ........
Norcross III, GA ......
Peachtree City I, GA
Peachtree City II, GA
Smyrna, GA .............
Snellville, GA ..........
Suwanee I, GA .........
Suwanee II, GA ........
Addison, IL ..............
Aurora, IL ................
Bartlett, IL ................
Bellwood, IL ............
Des Plaines, IL (6) ...
Elk Grove Village, IL
Glenview, IL ............
Gurnee, IL ................
Hanover, IL ..............
Harvey, IL ................
Joliet, IL ...................
Kildeer, IL ................
Lombard, IL .............
Mount Prospect, IL ..
Mundelein, IL ..........
North Chicago, IL ....
Plainfield I, IL ..........
Plainfield II, IL ........
Schaumburg, IL .......
Streamwood, IL .......
Warrensville, IL .......
Waukegan, IL ...........
West Chicago, IL .....
Westmont, IL ...........
Wheeling I, IL ..........
Wheeling II, IL ........
Woodridge, IL ..........
Indianapolis, IN .......
Boston I, MA ...........
Boston II, MA ..........
Year Acquired/
Developed (1)
1997
2007
2007
2001
2004
2012
2001
2012
2006
1998
2012
2011
2011
2012
2001
2012
2011
2012
2001
2012
2001
2007
2007
2007
2004
2004
2004
2001
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2005
2004
2004
2005
2004
2004
2004
2004
2004
2004
2004
2010
2002
Year
Built
1995
2004
2001/2002
1997
1996
2008
1996
2008
2000
1986
2004
2009
1999
2005
1997
2007
1996
2005
1997
2005
2000
1996/1997
2000/2003
2005
1979
1996
1987
1999
1978
1987
1998
1987
1987
1987
1993
1988
1981
1979
1990
1985
1998
2000
1988
1982
1977/89
1977
1979
1979
1974
1979
1987
1976
1950
2001
Units
Manager
Apartment (3)
955
647
790
975
834
919
670
626
646
1,244
538
589
597
615
582
499
396
505
433
430
489
748
616
575
367
555
408
739
635
623
738
720
411
575
530
422
544
587
491
427
404
355
321
557
377
682
430
377
491
601
462
713
592
628
Y
N
N
Y
Y
Y
Y
N
Y
Y
N
N
N
N
Y
Y
N
Y
N
N
Y
Y
Y
N
Y
Y
Y
Y
N
Y
Y
N
Y
Y
Y
Y
Y
Y
Y
N
N
N
N
N
N
Y
Y
Y
N
Y
Y
Y
N
Y
% Climate
Controlled (4)
51.3%
85.3%
28.5%
47.2%
73.9%
51.2%
75.1%
100.0%
66.4%
2.7%
100.0%
100.0%
24.4%
55.0%
55.8%
100.0%
57.0%
81.6%
75.6%
47.7%
100.0%
27.1%
28.9%
61.8%
0.0%
6.9%
33.5%
52.1%
0.0%
5.5%
100.0%
34.1%
0.4%
3.0%
100.0%
0.0%
9.8%
12.7%
8.9%
0.0%
3.3%
22.8%
5.6%
4.4%
0.0%
8.4%
0.0%
0.0%
0.0%
7.3%
6.7%
0.0%
100.0%
100.0%
Occupancy (2)
82.5%
90.7%
86.9%
88.0%
90.5%
69.4%
87.2%
71.0%
81.8%
75.8%
89.7%
75.2%
82.0%
82.2%
89.2%
90.6%
95.2%
74.4%
87.8%
93.9%
91.8%
87.4%
86.9%
85.2%
86.2%
86.0%
89.8%
86.2%
81.9%
88.1%
91.8%
92.6%
88.5%
86.9%
84.9%
89.4%
88.1%
91.5%
89.6%
90.1%
90.0%
93.7%
83.5%
85.8%
86.6%
81.1%
91.3%
86.3%
87.9%
92.1%
85.4%
86.6%
75.4%
83.5%
Rentable
Square Feet
87,037
64,955
83,738
68,051
94,503
85,460
90,485
66,675
83,875
145,280
47,242
70,985
73,765
56,177
85,420
47,270
52,020
57,555
49,875
57,100
57,015
80,000
85,240
79,590
31,325
74,435
51,425
86,650
74,400
64,129
100,115
80,300
41,190
60,090
72,765
46,285
57,764
65,000
44,700
53,350
53,900
51,900
31,160
64,305
48,796
79,500
48,175
53,450
54,210
67,825
50,262
73,014
33,286
60,545
28
Leominster, MA .......
Medford, MA ...........
Baltimore, MD .........
California, MD .........
District Heights, MD
Gaithersburg, MD ....
Laurel, MD †............
Temple Hills, MD ....
Belmont, NC ............
Burlington I, NC ......
Burlington II, NC .....
Cary, NC ..................
Charlotte, NC ...........
Raleigh, NC .............
Bordentown, NJ .......
Brick, NJ ..................
Cherry Hill I, NJ ......
Cherry Hill II, NJ .....
Clifton, NJ ................
1998
2007
2001
2004
2011
2005
2001
2001
2001
2001
2001
2001
2002
1998
2012
1996
2010
2012
2005
1987/88/00
2001
1999/00
1998
2007
1998
1978/99/00
2000
1996/97/98
1990/91/93/
94/98
1991
1993/94/97
1999
1994/95
2006
1981
2004
2004
2001
53,823
58,765
93,350
77,865
78,660
87,045
162,792
97,200
81,600
109,396
42,305
112,086
69,000
48,675
50,600
51,725
52,600
65,050
105,550
81.3%
84.5%
83.4%
79.7%
80.2%
83.4%
87.7%
88.1%
86.1%
68.7%
77.2%
87.9%
88.3%
88.8%
81.5%
82.5%
73.4%
72.1%
89.0%
500
659
809
720
954
785
1,022
827
586
950
394
794
737
412
385
432
378
610
1,018
Y
Y
Y
Y
Y
Y
N
Y
N
N
Y
N
Y
Y
N
N
Y
N
Y
38.5%
96.0%
45.3%
39.0%
90.3%
42.0%
41.1%
68.5%
23.1%
4.7%
12.0%
7.5%
52.8%
8.2%
18.8%
0.0%
0.0%
87.5%
85.5%
29
Year Acquired/
Developed (1)
Facility Location
Cranford, NJ..........
East Hanover, NJ ..
Egg Harbor I, NJ ...
Egg Harbor II, NJ
Elizabeth, NJ .........
Fairview, NJ ..........
Freehold, NJ .........
Hamilton, NJ .........
Hoboken, NJ .........
Linden, NJ .............
Lumberton, NJ ......
Morris Township, NJ (6)
Parsippany, NJ ......
Randolph, NJ ........
Sewell, NJ .............
Somerset, NJ ........
Albuquerque I, NM
Albuquerque II, NM
Albuquerque III, NM
Las Vegas I, NV † .
Las Vegas II, NV ..
Bronx I, NY ..........
Bronx II, NY (5) ...
Bronx III, NY ........
Bronx IV, NY (5) ..
Bronx V, NY (5) ...
Bronx VI, NY (5) ..
Bronx VII, NY (5)
Bronx VIII, NY .....
Bronx IX, NY .......
Bronx X, NY .........
Brooklyn I, NY .....
Brooklyn II, NY ....
Brooklyn III, NY ...
Brooklyn IV, NY ..
Brooklyn V, NY ....
Brooklyn VI, NY ..
Jamaica I, NY .......
Jamaica II, NY ......
New Rochelle I, NY
New Rochelle II, NY
North Babylon, NY
Queens, NY ...........
Riverhead, NY ......
Southold, NY ........
Tuckahoe, NY .......
West Hempstead, NY
White Plains, NY ..
Woodhaven, NY ...
Wyckoff, NY ........
Yorktown, NY ......
Cleveland I, OH ....
Cleveland II, OH ...
Columbus , OH .....
1996
1996
2010
2010
2005
1997
2012
2006
2005
1996
2012
1997
1997
2002
2001
2012
2005
2005
2005
2006
2006
2010
2011
2011
2011
2011
2011
2012
2012
2012
2012
2010
2011
2011
2011
2011
2011
2001
2011
2005
2012
1998
2010
2005
2005
2011
2012
2011
2011
2010
2011
2005
2005
2006
Year
Built
1987
1983
2005
2002
1925/97
1989
2002
1990
1945/97
1983
2004
1972
1981
1998/99
1984/98
2000
1985
1985
1986
1986
1997
1931/2004
2006
2007
2007
2007
2011
2005
1928
1973
2001
1917/2004
2006
2006
2007
2007
2006
2000
2010
1998
1917
1988/99
1962/2003
1985/86/99
1989
2007
2002
1938
2008
1910/2007
2006
1997/99
2000
1999
Units
Manager
Apartment (3)
851
966
293
704
674
448
760
614
742
1,118
786
565
566
541
454
513
609
527
484
369
516
1,322
831
2,040
1,314
1,095
1,092
1,524
545
3,021
2,661
861
851
793
887
1,416
1,396
918
1,473
401
1,029
651
1,148
328
599
758
903
1,508
1,029
1,042
783
340
565
602
Y
N
N
N
N
N
N
Y
N
N
Y
Y
Y
Y
N
N
Y
Y
Y
Y
Y
N
N
N
N
N
N
N
N
Y
Y
N
N
N
N
N
N
Y
N
N
Y
N
N
N
N
N
Y
N
N
N
Y
Y
Y
Y
% Climate
Controlled (4)
7.9%
1.6%
12.6%
16.6%
0.0%
100.0%
56.4%
0.0%
100.0%
2.1%
27.8%
1.3%
6.9%
82.5%
5.3%
69.3%
3.2%
4.1%
4.7%
5.4%
75.2%
96.5%
58.3%
97.3%
96.7%
100.0%
93.9%
100.0%
100.0%
99.0%
65.8%
83.0%
100.0%
100.0%
100.0%
94.5%
100.0%
30.7%
84.5%
15.0%
93.4%
9.0%
25.3%
0.0%
3.0%
99.2%
30.8%
77.2%
90.5%
90.2%
63.3%
5.0%
0.0%
25.6%
Occupancy (2)
89.4%
73.8%
85.4%
62.6%
82.7%
84.9%
87.3%
82.2%
81.5%
84.4%
81.2%
83.0%
83.6%
82.1%
87.7%
90.1%
79.7%
89.4%
87.7%
84.7%
86.5%
84.1%
92.5%
83.3%
76.5%
85.6%
81.1%
80.1%
78.6%
84.8%
79.5%
81.5%
92.7%
90.3%
86.9%
83.2%
91.6%
91.3%
84.8%
55.1%
85.1%
91.8%
93.2%
97.1%
81.6%
87.5%
91.1%
84.7%
80.5%
82.2%
83.3%
89.6%
82.5%
81.4%
Rentable
Square Feet
91,250
107,679
36,025
70,425
38,830
27,875
81,495
70,550
34,200
100,425
96,025
71,776
66,325
52,465
57,830
57,585
65,927
58,598
57,536
48,596
48,850
68,813
90,270
106,065
75,580
54,683
39,495
78,575
30,550
148,470
159,830
57,020
41,625
37,467
46,945
74,415
72,710
88,415
91,325
48,434
63,295
78,188
60,945
38,340
59,745
51,688
85,281
87,705
50,665
61,960
78,615
46,050
58,425
71,905
30
Grove City, OH .....
Hilliard, OH ..........
Lakewood, OH ......
Marblehead, OH ....
Middleburg Heights, OH
North Olmsted I, OH
North Olmsted II, OH
North Randall, OH
Reynoldsburg, OH
Strongsville, OH ...
Warrensville
Heights, OH ......
Westlake, OH ........
Conshohocken, PA
Exton, PA .............
Langhorne, PA .....
Levittown, PA .......
Montgomeryville, PA
Norristown, PA .....
Philadelphia, PA ...
2006
2006
1989*
2005
1980*
1979*
1988*
1998*
2006
2007
1980*
2005
2012
2012
2012
2001
2012
2011
2001
1997
1995
1989
1988/98
1980
1979
1988
1998/02
1979
1978
1980/82/98
2001
2003
2006
2001
2000
2003
2005
1999
89,290
89,690
39,287
52,300
92,725
48,665
47,850
80,229
66,895
43,507
90,281
62,750
81,435
57,650
65,150
76,180
84,145
52,031
97,289
83.1%
85.2%
88.5%
83.2%
90.6%
85.5%
82.2%
89.8%
85.0%
92.3%
84.4%
90.0%
87.8%
88.9%
85.3%
85.9%
77.0%
81.8%
85.6%
773
777
455
382
682
442
396
799
664
400
723
453
728
548
670
655
773
501
954
Y
Y
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
N
Y
Y
Y
N
N
16.9%
24.5%
24.6%
0.0%
3.8%
7.0%
14.2%
90.8%
0.0%
100.0%
0.0%
6.1%
35.0%
90.3%
59.3%
36.3%
47.9%
86.8%
47.1%
31
Facility Location
Alcoa, TN .............
Antioch, TN ..........
Cordova I, TN .......
Cordova II, TN ......
Knoxville I, TN .....
Knoxville II, TN ...
Knoxville III, TN ..
Knoxville V, TN ...
Knoxville VI, TN ..
Knoxville VII, TN .
Knoxville VIII, TN
Memphis I, TN ......
Memphis II, TN ....
Memphis III, TN ...
Memphis IV, TN ...
Memphis V, TN ....
Memphis VI, TN ...
Memphis VII, TN
Memphis VIII, TN †
Nashville I, TN .....
Nashville II, TN ....
Nashville III, TN ...
Nashville IV, TN ...
Allen, TX ..............
Austin I, TX ..........
Austin II, TX .........
Austin III, TX .......
Baytown, TX .........
Bryan, TX .............
Carrollton, TX .......
College Station, TX
Cypress, TX ..........
Dallas, TX .............
Denton, TX ...........
El Paso I, TX .........
El Paso II, TX .......
El Paso III, TX ......
El Paso IV, TX ......
El Paso V, TX .......
El Paso VI, TX ......
El Paso VII, TX †
Fort Worth I, TX ...
Fort Worth II, TX
Frisco I, TX ...........
Frisco II, TX .........
Frisco III, TX ........
Frisco IV, TX ........
Garland I, TX ........
Garland II, TX .......
Greenville I, TX ....
Greenville II, TX ...
Houston I, TX .......
Houston II, TX ......
Houston III, TX .....
Houston IV, TX ....
Houston V, TX † ...
Year Acquired/
Developed (1)
2005
2005
2005
2006
1997
1997
1998
1998
2005
2005
2005
2001
2001
2005
2005
2005
2006
2006
2006
2005
2005
2006
2006
2012
2005
2006
2006
2005
2005
2012
2005
2012
2005
2006
2005
2005
2005
2005
2005
2005
2005
2005
2006
2005
2005
2006
2010
2006
2006
2005
2005
2005
2005
2005
2005
2006
Year
Built
1986
1985/98
1987
1995
1984
1985
1991
1977
1975
1983
1978
1999
2000
1983
1986
1981
1985/93
1980/85
1990
1984
1986/00
1985
1986/00
2003
2001
2000/03
2004
1981
1994
2002
1993
1998
2000
1996
1980
1980
1980
1983
1982
1985
1982
2000
2003
1996
1998/02
2004
2007
1991
2004
2001/04
2001
1981
1977
1984
1987
1980/1997
Occupancy (2)
86.2%
88.5%
88.6%
76.5%
75.0%
77.5%
82.8%
80.0%
85.8%
77.7%
70.8%
89.7%
91.4%
80.4%
80.2%
86.0%
82.3%
85.1%
75.8%
86.2%
87.7%
91.4%
91.0%
88.1%
84.0%
79.8%
81.9%
82.7%
63.2%
71.2%
74.8%
75.1%
88.7%
87.5%
91.5%
94.8%
80.6%
85.1%
76.0%
92.1%
35.4%
85.8%
89.3%
81.8%
83.2%
87.7%
89.3%
93.1%
92.0%
78.9%
82.6%
82.9%
87.9%
82.5%
87.7%
81.8%
Rentable
Square Feet
42,350
76,160
54,125
67,700
29,337
37,900
45,736
42,790
63,440
55,594
95,868
92,320
71,710
40,507
38,678
60,120
108,996
96,163
96,060
103,910
83,484
101,575
102,450
62,490
59,520
65,241
70,560
38,950
60,450
77,420
26,559
58,141
59,324
60,836
59,952
48,704
71,252
67,058
62,290
36,620
34,545
50,621
72,900
50,854
70,999
74,815
74,835
70,100
68,425
59,385
44,900
100,730
71,300
60,820
43,975
126,180
32
Units
Manager
Apartment (3)
354
618
387
711
281
326
445
373
583
454
763
699
556
347
319
498
875
533
548
695
632
598
732
524
538
594
580
350
495
549
346
442
534
462
513
412
585
527
402
257
5
406
653
431
511
611
512
679
469
448
313
616
391
461
383
1,013
Y
Y
Y
Y
Y
Y
Y
N
Y
Y
Y
N
N
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
N
Y
Y
Y
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
N
Y
Y
Y
N
Y
Y
Y
Y
Y
% Climate
Controlled (4)
0.0%
8.5%
0.0%
7.2%
6.8%
7.0%
6.9%
0.0%
0.0%
0.0%
0.0%
57.1%
46.3%
6.2%
4.1%
0.0%
4.1%
0.0%
0.0%
0.0%
6.5%
5.2%
7.0%
40.2%
58.8%
38.9%
85.4%
0.0%
0.0%
0.0%
0.0%
42.3%
28.0%
3.9%
0.9%
0.0%
2.0%
3.2%
0.0%
0.0%
0.0%
26.6%
49.0%
17.5%
25.2%
86.0%
16.4%
4.4%
39.6%
28.8%
36.3%
0.0%
0.0%
4.4%
6.1%
55.0%
Year Acquired/
Developed (1)
Facility Location
Houston VI, TX ...
Houston VII, TX ...
Houston VIII, TX
Keller, TX .............
La Porte, TX .........
Lewisville, TX ......
Mansfield I, TX .....
Mansfield II, TX ...
McKinney I, TX ....
McKinney II, TX ..
North Richland Hills, TX
Pearland, TX .........
Roanoke, TX .........
San Antonio I, TX .
San Antonio II, TX
San Antonio III, TX
2011
2012
2012
2006
2005
2006
2006
2012
2005
2006
2005
2012
2005
2005
2006
2007
Year
Built
2002
1989
1992
2000
1984
1996
2003
2002
1996
1996
2002
1985
1996/01
2005
2005
2006
Rentable
Square Feet
54,680
54,882
53,630
61,885
44,850
58,140
63,075
58,400
47,020
70,050
57,200
72,249
59,500
73,305
73,230
71,775
Occupancy (2)
89.4%
86.9%
72.5%
85.7%
89.4%
84.6%
93.8%
95.2%
84.9%
81.5%
83.5%
75.0%
91.5%
85.8%
88.8%
84.6%
Units
Manager
Apartment (3)
588
499
429
486
426
429
486
484
362
537
433
457
450
573
670
569
N
N
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
Y
Y
N
N
% Climate
Controlled (4)
100.0%
71.2%
39.1%
21.1%
15.4%
19.7%
38.4%
55.1%
9.2%
46.3%
47.6%
32.6%
29.9%
79.0%
82.3%
87.4%
33
Facility Location
Sherman I, TX .........
Sherman II, TX .......
Spring, TX ..............
Murray I, UT ...........
Murray II, UT † ......
Salt Lake City I, UT
Salt Lake City II, UT
Alexandria, VA .......
Burke Lake, VA ......
Fairfax, VA .............
Fredericksburg I, VA
Fredericksburg II, VA
Leesburg, VA ..........
Mannasas, VA .........
McLearen, VA ........
Vienna, VA .............
Milwaukee, WI .......
Year Acquired/
Developed (1)
2005
2005
2006
2005
2005
2005
2005
2012
2011
2012
2005
2005
2011
2010
2010
2012
2004
Year
Built
1998
1996
1980/86
1976
1978
1976
1978
2000
2003
1999
2001/04
1998/01
2001/04
1998
2002
2000
1988
Rentable
Square Feet
54,975
48,425
72,751
60,280
71,221
56,446
51,676
114,650
90,927
73,650
69,475
61,207
85,503
73,045
69,240
54,318
58,500
Occupancy (2)
82.0%
79.8%
79.5%
87.4%
90.3%
83.9%
87.5%
74.4%
85.2%
88.6%
80.0%
76.2%
89.9%
83.4%
88.8%
94.6%
81.2%
Units
505
391
535
632
371
724
480
1,156
910
683
605
562
890
638
719
559
486
% Climate
Manager
Apartment (3) Controlled (4)
21.1%
30.9%
14.1%
0.0%
2.6%
0.0%
0.0%
100.0%
72.5%
77.4%
21.4%
100.0%
75.7%
50.9%
90.0%
92.5%
0.0%
Y
Y
N
Y
Y
Y
Y
N
Y
N
N
N
Y
Y
Y
Y
Y
Total/Weighted
Average
(381 facilities) .....
* Denotes facilities developed by us.
25,485,304
84.4%
239,153
† Denotes facilities that contain commercial rentable square footage. All of this commercial space, which was developed in
conjunction with the self-storage cubes, is located within or adjacent to our self-storage facilities and is managed by our self-storage
facility managers. As of December 31, 2012, there was an aggregate of approximately 373,000 rentable square feet of commercial
space at these facilities.
(1) Represents the year acquired for those facilities acquired from a third party or the year developed for those facilities developed by
us.
(2) Represents occupied square feet divided by total rentable square feet at December 31, 2012.
(3) Indicates whether a facility has an on-site apartment where a manager resides.
(4) Represents the percentage of rentable square feet in climate-controlled cubes.
(5) We do not own the land at these facilities. We lease the land pursuant to ground leases that expire between 2052 and 2059, but
have renewal options.
(6) We have ground leases for certain small parcels of land adjacent to these facilities that expire between 2013 and 2019.
We have grown by adding facilities to our portfolio through acquisitions and development. The tables set forth below show the
average occupancy, annual rent per occupied square foot, average occupied square feet and total revenues for our facilities owned as
of December 31, 2012, and for each of the previous three years, grouped by the year during which we first owned or operated the
facility.
34
Facilities by Year Acquired - Average Occupancy
Year Acquired (1)
# of Facilities
Feet
2012
Rentable Square
Average Occupancy
2011
2010
2009 and earlier ............
2010 ..............................
2011 (5) .........................
2012 ..............................
All Facilities Owned as of
December 31, 2012 .......
306
12
26
37
381
20,308,555
734,759
1,795,171
2,646,819
25,485,304
82.6%
78.3%
82.3%
83.8%
82.5%
79.3%
69.1%
78.7%
—
78.9%
77.2%
67.7%
—
—
77.1%
Facilities by Year Acquired - Annual Rent Per Occupied Square Foot (2)
Year Acquired (1)
# of Facilities
2012
Rent per Square Foot
2011
2010
2009 and earlier .........................
2010 ...........................................
2011 (5) ......................................
2012 ...........................................
All Facilities Owned as of
December 31, 2012 ....................
$
306
12
26
37
$
11.80
18.44
24.01
15.55
$
11.98
19.12
22.80
—
11.96
13.50
—
—
381
$
13.24
$
13.02
$
12.01
Facilities by Year Acquired - Average Occupied Square Feet (3)
Year Acquired (1)
# of Facilities
2012
Average Occupied Square Feet
2011
2010
2009 and earlier .......................................
2010 .........................................................
2011 (5) ....................................................
2012 .........................................................
All Facilities Owned as of December 31,
2012 .........................................................
$
306
12
26
37
16,769,285
578,149
1,476,913
2,199,295
$
16,117,150
510,496
1,409,521
—
$
15,680,890
480,918
—
—
381
21,023,642
18,037,167
16,161,808
Facilities by Year Acquired - Total Revenues (dollars in thousands) (4)
Year Acquired (1)
# of Facilities
2012
Total Revenues
2011
2010
2009 and earlier .......................................
2010 .........................................................
2011 (5) ....................................................
2012 .........................................................
All Facilities Owned as of December 31,
2012 .........................................................
$
306
12
26
37
$
207,875
11,181
36,945
19,028
$
200,741
10,108
9,548
—
193,614
1,663
—
—
381
$
275,029
$
220,397
$
195,277
(1) For facilities developed by us, “Year Acquired” represents the year in which such facilities were acquired by our operating
partnership from an affiliated entity, which in some cases is later than the year developed.
(2) Determined by dividing the aggregate rental revenue for each twelve-month period by the average of the month-end occupied
square feet for the period. Rental revenue includes the impact of promotional discounts, which reduce rental income over the
promotional period, of $16.1 million, $13.3 million and$11.7 million, for the periods ended December 31, 2012, 2011 and 2010.
35
(3) Represents the average of the aggregate month-end occupied square feet for the twelve-month period for each group of facilities.
(4) Represents the result obtained by multiplying total income per occupied square foot by the average occupied square feet for the
twelve-month period for each group of facilities. This result will vary from amounts reported on the financial statements.
(5) Facility count does not include the Phoenix parcel acquisition in 2011. The parcel is adjacent to a property that was purchased in
2006 and is therefore consolidated with that property.
Planned Renovations and Improvements
We have a capital improvement and property renovation program that includes office upgrades, adding climate control at selected
cubes, construction of parking areas, safety and security enhancements, and general facility upgrades. For 2013, we anticipate
spending approximately $7 million to $10 million associated with these capital expenditures and expect to enhance the safety and
improve the aesthetic appeal of our facilities.
ITEM 3. LEGAL PROCEEDINGS
We are involved in claims from time to time, which arise in the ordinary course of business. In the opinion of management, we
have made adequate provisions for potential liabilities, if any, arising from any such matters. However, litigation is inherently
unpredictable, and the costs and other effects of pending or future litigation, governmental investigations, legal and administrative
cases and proceedings (whether civil or criminal), settlements, judgments and investigations, claims and changes in any such matters,
could have a material adverse effect on our business, financial condition and operating results.
ITEM 4. MINING SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
As of December 31, 2012, there were approximately 61 registered record holders of the Parent Company’s common shares and 12
holders of the Operating Partnership’s Units (other than the Parent Company). These figures do not include beneficial owners who
hold shares in nominee name. There is no established trading market for the Units of the Operating Partnership. The following table
shows the high and low closing prices per share for our common shares, as reported by the New York Stock Exchange, and the cash
dividends declared with respect to such shares:
2011
First quarter .................
Second quarter ............
Third quarter ...............
Fourth quarter .............
2012
First quarter .................
Second quarter ............
Third quarter ...............
Fourth quarter .............
$
$
$
$
$
$
$
$
High
Low
Cash Dividends
Declared
10.57
11.39
11.15
10.66
12.14
12.81
13.48
14.67
$
$
$
$
$
$
$
$
9.20
9.93
8.53
8.04
10.30
10.90
11.69
12.59
$
$
$
$
$
$
$
$
0.070
0.070
0.070
0.080
0.080
0.080
0.080
0.110
For each quarter in 2011 and 2012, the Operating Partnership paid a cash distribution per Unit in an amount equal to the dividend
paid on a common share for each such quarter.
36
Since our initial quarter as a publicly-traded REIT, we have made regular quarterly distributions to our shareholders. Distributions
to shareholders are usually taxable as ordinary income, although a portion of the distribution may be designated as capital gain or may
constitute a tax-free return of capital. Annually, we provide each of our shareholders a statement detailing distributions paid during
the preceding year and their characterization as ordinary income, capital gain or return of capital. The characterization of our
dividends for 2012 was as follows: 81.7538% ordinary income distribution, 14.9075% capital gain distribution, and 3.3387% return of
capital distribution from earnings and profits.
Distributions to 7.75% Series A Cumulative Redeemable Preferred Shareholders are usually taxable as ordinary income, although a
portion of the distribution may be designated as capital gain or may constitute a tax-free return of capital. Annually, we provide each
of our shareholders a statement detailing preferred distributions paid during the preceding year and their characterization as ordinary
income, capital gain or return of capital. The characterization of our preferred dividends for 2012 was as follows: 84.5778% ordinary
income distribution and 15.4222% capital gain distribution from earnings and profits.
We intend to continue to declare quarterly distributions. However, we cannot provide any assurance as to the amount or timing of
future distributions. Under the revolving portion of our 2011 Credit Facility, we are restricted from paying distributions on our
common shares that would exceed an amount equal to the greater of (i) 95% of our funds from operations, and (ii) such amount as
may be necessary to maintain our REIT status.
To the extent that we make distributions in excess of our earnings and profits, as computed for federal income tax purposes, these
distributions will represent a return of capital, rather than a dividend, for federal income tax purposes. Distributions that are treated as
a return of capital for federal income tax purposes generally will not be taxable as a dividend to a U.S. shareholder, but will reduce the
shareholder’s basis in its shares (but not below zero) and therefore can result in the shareholder having a higher gain upon a
subsequent sale of such shares. Return of capital distributions in excess of a shareholder’s basis generally will be treated as gain from
the sale of such shares for federal income tax purposes.
37
Share Performance Graph
The SEC requires us to present a chart comparing the cumulative total shareholder return on our common shares with the
cumulative total shareholder return of (i) a broad equity index and (ii) a published industry or peer group index. The following chart
compares the yearly cumulative total shareholder return for our common shares with the cumulative shareholder return of companies
on (i) the S&P 500 Index, (ii) the Russell 2000 and (iii) the NAREIT All Equity REIT Index as provided by NAREIT for the period
beginning December 31, 2007 and ending December 31, 2012.
Index
CubeSmart ......................................
S&P 500 ..........................................
Russell 2000 ....................................
NAREIT All Equity REIT Index ....
12/31/07
12/31/08
12/31/09
12/31/10
12/31/11
12/31/12
100.00
100.00
100.00
100.00
52.03
63.00
66.21
62.27
87.82
79.68
84.20
79.70
115.84
91.68
106.82
101.98
133.17
93.61
102.36
110.42
188.85
108.59
119.09
132.18
Period Ending
There were no repurchases of the Parent Company’s common shares during the three-month period ended December 31, 2012.
ITEM 6. SELECTED FINANCIAL DATA
CUBESMART
The following table sets forth selected financial and operating data on a historical consolidated basis for the Parent Company. The
selected historical financial information for the five-year period ended December 31, 2012 was derived from the Parent Company’s
financial statements, which have been audited by KPMG LLP.
The following data should be read in conjunction with the audited financial statements and notes thereto of the Parent Company and
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report.
38
2012
For the year ended December 31,
2010
(Dollars and shares in thousands, except per share data)
2011
2009
2008
REVENUES
Rental income .................................................................
Other property related income ........................................
Property management fee income ...................................
Total revenues .............................................................
$ 250,959
27,776
4,341
283,076
$ 202,762
20,715
3,768
227,245
$ 179,748
17,114
2,829
199,691
$ 178,669
14,659
56
193,384
$ 185,426
13,708
—
199,134
OPERATING EXPENSES
Property operating expenses ...........................................
Depreciation and amortization ........................................
General and administrative .............................................
Total operating expenses .............................................
OPERATING INCOME
OTHER INCOME (EXPENSE)
Interest:
Interest expense on loans ............................................
Loan procurement amortization expense ....................
Loan procurement amortization expense - early
repayment of debt ...................................................
Acquisition related costs .................................................
Equity in losses of real estate ventures ...........................
Gain from remeasurement of investment in real estate
venture ........................................................................
Other ...............................................................................
Total other expense .....................................................
LOSS FROM CONTINUING OPERATIONS
DISCONTINUED OPERATIONS
Income from discontinued operations .............................
Net gain on disposition of discontinued operations ........
Total discontinued operations ....................................
NET INCOME (LOSS)
NET (INCOME) LOSS ATTRIBUTABLE TO
NONCONROLLING INTERESTS
Noncontrolling interests in the Operating Partnership ....
Noncontrolling interest in subsidiaries ............................
NET INCOME (LOSS) ATTRIBUTABLE TO THE
COMPANY
Distribution to Preferred Shares ......................................
NET (LOSS) INCOME ATTRIBUTABLE TO
COMMON SHAREHOLDERS OF THE
COMPANY
Basic and diluted loss per share from continuing
operations attributable to common shareholders .............
Basic and diluted earnings per share from discontinued
operations attributable to common shareholders .............
Basic and diluted (loss) earnings per share attributable to
common shareholders .....................................................
Weighted-average basic and diluted shares
110,821
113,874
26,131
250,826
32,250
94,630
65,955
24,693
185,278
41,967
85,779
58,876
25,406
170,061
29,630
83,968
63,825
22,569
170,362
23,022
84,716
66,924
24,964
176,604
22,530
(40,715)
(3,279)
(33,199)
(5,028)
(37,794)
(6,463)
(45,269)
(2,339)
(52,014)
(1,929)
—
(3,086)
(745)
7,023
256
(40,546)
(8,296)
2,113
9,811
11,924
3,628
107
(1,918)
1,817
(6,008)
(8,167)
(3,823)
(281)
—
(83)
(50,581)
(8,614)
7,158
3,903
11,061
2,447
(35)
(2,810)
(398)
(1,218)
—
(759)
—
—
386
(44,630)
(15,000)
7,155
1,826
8,981
(6,019)
381
(1,755)
(7,393)
—
—
—
—
—
648
(46,960)
(23,938)
9,467
14,139
23,606
(332)
60
(665)
(937)
—
—
—
—
—
247
(53,696)
(31,166)
14,548
19,720
34,268
3,102
(310)
—
2,792
—
$
$
$
$
(4,191) $
(1,616) $
(7,393) $
(937) $
2,792
(0.13) $
(0.12) $
(0.17) $
(0.32) $
(0.50)
0.10
$
0.10
$
0.09
$
0.31
$
0.55
(0.03) $
(0.02) $
(0.08) $
(0.01) $
0.05
outstanding (1) ................................................................
124,548
102,976
93,998
70,988
57,621
AMOUNTS ATTRIBUTABLE TO THE COMPANY’S
COMMON SHAREHOLDERS:
Loss from continuing operations .........................................
Total discontinued operations .............................................
Net (loss) income ................................................................
$ (15,829) $ (12,168) $ (15,907) $
10,552
(1,616) $
8,514
(7,393) $
11,638
(4,191) $
$
(22,631) $ (28,663)
31,455
21,694
2,792
(937) $
39
Balance Sheet Data (in thousands):
Storage facilities, net ........................................
Total assets .......................................................
Unsecured senior notes .....................................
Revolving credit facility ...................................
Unsecured term loan .........................................
Secured term loan .............................................
Mortgage loans and notes payable ....................
Total liabilities .................................................
Noncontrolling interest in the Operating
Partnership ....................................................
CubeSmart shareholders’ equity .......................
Noncontrolling interests in subsidiaries ............
Total liabilities and equity ................................
Other Data:
Number of facilities ..........................................
Total rentable square feet (in thousands) ..........
Occupancy percentage ......................................
Cash dividends declared per share (2) .............
2012
2011
At December 31,
2010
2009
2008
$ 2,089,707
2,150,319
250,000
45,000
500,000
—
228,759
1,112,420
$ 1,788,720
1,875,979
—
—
400,000
—
358,441
830,925
$ 1,428,491
1,478,819
—
43,000
200,000
—
372,457
668,266
$ 1,430,533
1,598,870
—
—
—
200,000
569,026
814,146
$ 1,559,958
1,597,659
—
172,000
200,000
57,419
548,085
1,028,705
47,990
989,791
118
2,150,319
49,732
955,913
39,409
1,875,979
45,145
724,216
41,192
1,478,819
45,394
695,309
44,021
1,598,870
46,026
522,928
—
1,597,659
381
25,485
84.4%
0.350
$
370
24,420
78.4%
0.290
$
363
23,635
76.3%
0.145
$
367
23,749
75.2%
0.100
$
387
24,973
78.9%
0.565
$
(1) Excludes operating partnership units issued at our IPO and in connection with the acquisition of facilities subsequent to our IPO.
Operating partnership units have been excluded from the earnings per share calculations as the related income or loss is presented
in Noncontrolling interests in the Operating Partnership.
(2) The Company announced full quarterly dividends of $0.180 per common share on December 13, 2007, February 27, 2008,
May 7, 2008, and August 6, 2008; dividends of $0.025 per common share on December 11, 2008, January 22, 2009, April 22,
2009, July 22, 2009, October 22, 2009, December 5, 2009, February 24, 2010, June 2, 2010, and August 4, 2010; dividends of
$0.070 per common share on December 14, 2010, February 29, 2011, June 1, 2011, and August 3, 2011; dividends of $0.080 and
$0.393 per common and preferred shares, respectively, on December 8, 2011; dividends of $0.080 and $0.484 per common and
preferred shares, respectively, on February 21, 2012, May 30, 2012 and August 1, 2012, and dividends of $0.110 and $0.484 per
common and preferred shares, respectively, on December 10, 2012.
CUBESMART, L.P.
The following table sets forth selected financial and operating data on a historical consolidated basis for the Operating Partnership.
The selected financial data for the periods ended December 31, 2012, 2011, 2010, 2009 and 2008 have been derived from the
historical consolidated financial statements of CubeSmart, L.P. and subsidiaries, which have been audited by KPMG LLP.
The following data should be read in conjunction with the audited financial statements and notes thereto of the operating
Partnership and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this
report.
40
2012
For the year ended December 31,
2010
(Dollars and shares in thousands, except per unit data)
2011
2009
2008
REVENUES
Rental income ....................................................................
Other property related income ...........................................
Property management fee income ......................................
Total revenues ................................................................
OPERATING EXPENSES
Property operating expenses ..............................................
Depreciation and amortization ...........................................
General and administrative ................................................
Total operating expenses ................................................
OPERATING INCOME .....................................................
OTHER INCOME (EXPENSE)
Interest:
Interest expense on loans ...............................................
Loan procurement amortization expense .......................
Loan procurement amortization expense - early
repayment of debt ......................................................
Acquisition related costs ....................................................
Equity in losses of real estate ventures ..............................
Gain from remeasurement of investment in real estate
venture ...........................................................................
Other ..................................................................................
Total other expense ........................................................
LOSS FROM CONTINUING OPERATIONS .................
DISCONTINUED OPERATIONS
Income from discontinued operations ................................
Net gain on disposition of discontinued operations ...........
Total discontinued operations ........................................
NET INCOME (LOSS) ........................................................
NET LOSS (INCOME) ATTRIBUTABLE TO
NONCONROLLING INTERESTS
$ 250,959 $ 202,762 $ 179,748 $ 178,669 $ 185,426
13,708
—
199,134
27,776
4,341
283,076
17,114
2,829
199,691
20,715
3,768
227,245
14,659
56
193,384
110,821
113,874
26,131
250,826
32,250
94,630
65,955
24,693
185,278
41,967
85,779
58,876
25,406
170,061
29,630
83,968
63,825
22,569
170,362
23,022
84,716
66,924
24,964
176,604
22,530
(40,715)
(3,279)
(33,199)
(5,028)
(37,794 )
(6,463 )
(45,269)
(2,339)
(52,014)
(1,929)
—
(3,086)
(745)
7,023
256
(40,546)
(8,296)
2,113
9,811
11,924
3,628
(8,167)
(3,823)
(281)
—
(83)
(50,581)
(8,614)
7,158
3,903
11,061
2,447
—
(759 )
—
—
386
(44,630 )
(15,000 )
7,155
1,826
8,981
(6,019 )
—
—
—
—
648
(46,960)
(23,938)
9,467
14,139
23,606
(332)
—
—
—
—
247
(53,696)
(31,166)
14,548
19,720
34,268
3,102
Noncontrolling interest in subsidiaries ...............................
(1,918)
(2,810)
(1,755 )
(665)
—
NET (LOSS) INCOME ATTRIBUTABLE TO
CUBESMART L.P. ..........................................................
Limited Partnership interest of third parties .......................
1,710
107
(363)
(35)
NET (LOSS) INCOME ATTRIBUTABLE TO
OPERATING PARTNER ...............................................
Distribution to Preferred Shares .........................................
1,817
(6,008)
(398)
(1,218)
(7,774 )
381
(7,393 )
—
(997)
60
(937)
—
3,102
(310)
2,792
—
NET(LOSS) INCOME ATTRIBUTABLE TO
COMMON UNITHOLDERS .........................................
$
(4,191) $
(1,616) $
(7,393 ) $
(937) $
2,792
Basic and diluted loss per unit from continuing operations
attributable to common unitholders ...................................
$
(0.13) $
(0.12) $
(0.17 ) $
(0.32) $
(0.50)
Basic and diluted earnings per unit from discontinued
operations attributable to common unitholders ..................
$
0.10 $
0.10 $
0.09 $
0.31 $
0.55
Basic and diluted (loss) earnings per unit attributable to
common unitholders ...........................................................
$
(0.03) $
(0.02) $
(0.08 ) $
(0.01) $
0.05
Weighted-average basic and diluted units outstanding (1) ....
124,548
102,976
93,998
70,988
57,621
AMOUNTS ATTRIBUTABLE TO COMMON
UNITHOLDERS:
Loss from continuing operations ............................................
Total discontinued operations ................................................
Net (loss) income ...................................................................
$
$
(15,829) $
11,638
(4,191) $
(12,168) $
10,552
(1,616) $
(15,907 ) $
8,514
(7,393 ) $
(22,631) $
21,694
(937) $
(28,663)
31,455
2,792
41
2012
2011
At December 31,
2010
2009
2008
Balance Sheet Data (in thousands):
Storage facilities, net ...................................
Total assets ..................................................
Unsecured senior notes ................................
Revolving credit facility ..............................
Unsecured term loan ....................................
Secured term loan ........................................
Mortgage loans and notes payable ...............
Total liabilities ............................................
Limited Partnership interest of third
parties .......................................................
CubeSmart L.P. Capital ...............................
Noncontrolling interests in subsidiaries .......
Total liabilities and capital ...........................
$ 2,089,707 $ 1,788,720 $ 1,428,491 $ 1,430,533 $ 1,559,958
1,597,659
—
172,000
200,000
57,419
548,085
1,028,705
2,150,319
250,000
45,000
500,000
—
228,759
1,112,420
1,875,979
—
—
400,000
—
358,441
830,925
1,598,870
—
—
—
200,000
569,026
814,146
1,478,819
—
43,000
200,000
—
372,457
668,266
47,990
989,791
118
2,150,319
49,732
955,913
39,409
1,875,979
45,145
724,216
41,192
1,478,819
45,394
695,309
44,021
1,598,870
46,026
522,928
—
1,597,659
Other Data:
Number of facilities .....................................
Total rentable square feet (in thousands) .....
Occupancy percentage .................................
Cash dividends declared per unit (2) ...........
$
381
25,485
84.4%
0.350 $
370
24,420
78.4%
0.290 $
363
23,635
76.3%
0.145 $
367
23,749
75.2%
0.100 $
387
24,973
78.9%
0.565
(1) Excludes operating partnership units issued at our IPO and in connection with the acquisition of facilities subsequent to our IPO.
Operating partnership units have been excluded from the earnings per share calculations as the related income or loss is presented
in Limited Partnership interest of third parties.
(2) The Company announced full quarterly dividends of $0.180 per common unit on December 13, 2007, February 27, 2008, May 7,
2008, and August 6, 2008; dividends of $0.025 per common unit on December 11, 2008, January 22, 2009, April 22, 2009,
July 22, 2009, October 22, 2009, December 5, 2009, February 24, 2010, June 2, 2010, and August 4, 2010; dividends of $0.070
per common unit on December 14, 2010, February 29, 2011, June 1, 2011, and August 3, 2011; dividends of $0.080 and $0.393
per common and preferred units, respectively, on December 8, 2011; dividends of $0.080 and $0.484 per common and preferred
units, respectively, on February 21, 2012, May 30, 2012 and August 1, 2012, and dividends of $0.110 and $0.484 per common
and preferred units, respectively, on December 10, 2012.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this
report. The Company makes certain statements in this section that are forward-looking statements within the meaning of the federal
securities laws. For a complete discussion of forward-looking statements, see the section in this report entitled “Forward-Looking
Statements.” Certain risk factors may cause actual results, performance or achievements to differ materially from those expressed or
implied by the following discussion. For a discussion of such risk factors, see the section in this report entitled “Risk Factors.”
Overview
The Company is an integrated self-storage real estate company, and as such we have in-house capabilities in the operation, design,
development, leasing, management and acquisition of self-storage facilities. The Parent Company’s operations are conducted solely
through the Operating Partnership and its subsidiaries. Effective September 14, 2011, the Parent Company changed its name from “U-
Store-It Trust” to “CubeSmart” and the Operating Partnership changed its name from “U-Store-It, L.P.” to “CubeSmart, L.P.” The
Parent Company has elected to be taxed as a REIT for U.S. federal income tax purposes. As of December 31, 2012 and December 31,
2011, the Company owned 381 and 370 self-storage facilities, respectively, totaling approximately 25.5 million rentable square feet
and 24.4 million rentable square feet, respectively. As of December 31, 2012 the Company owned facilities in the District of
Columbia and the following 22 states: Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Maryland,
Massachusetts, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Utah, Virginia
and Wisconsin. In addition, as of December 31, 2012, the Company managed 133 properties for third parties bringing the total
number of properties we owned and/or managed to 514. As of December 31, 2012 we managed facilities in the following 27 states:
Alabama, Arizona, Arkansas , California, Colorado, Connecticut, Florida, Georgia, Illinois, Louisiana, Maryland, Massachusetts,
42
Michigan, Minnesota, Mississippi, Nevada, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode
Island, South Carolina, Tennessee, Texas, and Virginia.
The Company derives revenues principally from rents received from its customers who rent cubes at its self-storage facilities under
month-to-month leases. Therefore, our operating results depend materially on our ability to retain our existing customers and lease
our available self-storage cubes to new customers while maintaining and, where possible, increasing our pricing levels. In addition,
our operating results depend on the ability of our customers to make required rental payments to us. We have a decentralized
approach to the management and operation of our facilities, which places an emphasis on local, market level oversight and control.
We believe this approach allows us to respond quickly and effectively to changes in local market conditions, and to maximize
revenues by managing rental rates and occupancy levels.
The Company typically experiences seasonal fluctuations in the occupancy levels of our facilities, which are generally slightly
higher during the summer months due to increased moving activity.
The United States continues to recover from an economic downturn that resulted in higher unemployment, stagnant employment
growth, shrinking demand for products, large-scale business failures and tight credit markets. Our results of operations may be
sensitive to changes in overall economic conditions that impact consumer spending, including discretionary spending, as well as to
increased bad debts due to recessionary pressures. A continuation of — or slow recovery from — ongoing adverse economic
conditions affecting disposable consumer income, such as employment levels, business conditions, interest rates, tax rates, fuel and
energy costs, and other matters could reduce consumer spending or cause consumers to shift their spending to other products and
services. A general reduction in the level of discretionary spending or shifts in consumer discretionary spending could adversely
affect our growth and profitability.
In the future, the Company intends to focus on maximizing internal growth opportunities and selectively pursuing targeted
acquisitions and developments of self-storage facilities.
The Company has one reportable segment: we own, operate, develop, manage and acquire self-storage facilities.
The Company’s self-storage facilities are located in major metropolitan and rural areas and have numerous tenants per facility. No
single tenant represents a significant concentration of our revenues. The facilities in New York, Florida, California, and Texas
provided approximately 16%, 15%, 10% and 10%, respectively, of total revenues for the year ended December 31, 2012.
Summary of Critical Accounting Policies and Estimates
Set forth below is a summary of the accounting policies that management believes are critical to the preparation of the consolidated
financial statements included in this Annual Report on Form 10-K. Certain of the accounting policies used in the preparation of these
consolidated financial statements are particularly important for an understanding of the financial position and results of operations
presented in the historical consolidated financial statements included in this report. A summary of significant accounting policies is
also provided in the notes to our consolidated financial statements (See Note 2 to the consolidated financial statements). These
policies require the application of judgment and assumptions by management and, as a result, are subject to a degree of uncertainty.
Due to this uncertainty, actual results could differ materially from estimates calculated and utilized by management.
Basis of Presentation
The accompanying consolidated financial statements include all of the accounts of the Company, and its majority-owned and/or
controlled subsidiaries. The portion of these entities not owned by the Company is presented as noncontrolling interests as of and
during the periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation.
When the Company obtains an economic interest in an entity, the Company evaluates the entity to determine if the entity is deemed
a variable interest entity (“VIE”), and if the Company is deemed to be the primary beneficiary, in accordance with authoritative
guidance issued by the Financial Accounting Standards Board (“FASB”) on the consolidation of VIEs. When an entity is not deemed
to be a VIE, the Company considers the provisions of additional FASB guidance to determine whether a general partner, or the
general partners as a group, controls a limited partnership or similar entity when the limited partners have certain rights. The
Company consolidates (i) entities that are VIEs and of which the Company is deemed to be the primary beneficiary and (ii) entities
that are non-VIEs which the Company controls and in which the limited partners do not have substantive participating rights, or the
ability to dissolve the entity or remove the Company without cause.
43
Self-Storage Facilities
The Company records self-storage facilities at cost less accumulated depreciation. Depreciation on the buildings and equipment is
recorded on a straight-line basis over their estimated useful lives, which range from five to 40 years. Expenditures for significant
renovations or improvements that extend the useful life of assets are capitalized. Repairs and maintenance costs are expensed as
incurred.
When facilities are acquired, the purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed
based on estimated fair values. When a portfolio of facilities is acquired, the purchase price is allocated to the individual facilities
based upon an income approach or a cash flow analysis using appropriate risk adjusted capitalization rates, which take into account
the relative size, age and location of the individual facility along with current and projected occupancy and rental rate levels or
appraised values, if available. Allocations to the individual assets and liabilities are based upon comparable market sales information
for land, buildings and improvements and estimates of depreciated replacement cost of equipment.
In allocating the purchase price for an acquisition, the Company determines whether the acquisition includes intangible assets or
liabilities. The Company allocated a portion of the purchase price to an intangible asset attributed to the value of in-place leases. This
intangible is generally amortized to expense over the expected remaining term of the respective leases. Substantially all of the leases
in place at acquired facilities are at market rates, as the majority of the leases are month-to-month contracts. Accordingly, to date no
portion of the purchase price has been allocated to above- or below-market lease intangibles. To date, no intangible asset has been
recorded for the value of tenant relationships, because the Company does not have any concentrations of significant tenants and the
average tenant turnover is fairly frequent.
Long-lived assets classified as “held for use” are reviewed for impairment when events and circumstances such as declines in
occupancy and operating results indicate that there may be impairment. The carrying value of these long-lived assets is compared to
the undiscounted future net operating cash flows, plus a terminal value, attributable to the assets to determine if the property’s basis is
recoverable. If a property’s basis is not considered recoverable, an impairment loss is recorded to the extent the net carrying value of
the asset exceeds the fair value. The impairment loss recognized equals the excess of net carrying value over the related fair value of
the asset.
The Company considers long-lived assets to be “held for sale” upon satisfaction of the following criteria: (a) management commits
to a plan to sell a facility (or group of facilities), (b) the facility is available for immediate sale in its present condition subject only to
terms that are usual and customary for sales of such facilities, (c) an active program to locate a buyer and other actions required to
complete the plan to sell the facility have been initiated, (d) the sale of the facility is probable and transfer of the asset is expected to
be completed within one year, (e) the facility is being actively marketed for sale at a price that is reasonable in relation to its current
fair value, and (f) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or
that the plan will be withdrawn.
Typically these criteria are all met when the relevant asset is under contract, significant non-refundable deposits have been made by
the potential buyer, the assets are immediately available for transfer and there are no contingencies related to the sale that may prevent
the transaction from closing. However, each potential transaction is evaluated based on its separate facts and circumstances.
Properties classified as held for sale are reported at the lesser of carrying value or fair value less estimated costs to sell.
Revenue Recognition
Management has determined that all our leases with tenants are operating leases. Rental income is recognized in accordance with
the terms of the lease agreements or contracts, which generally are month-to-month.
The Company recognizes gains on disposition of properties only upon closing in accordance with the guidance on sales of real
estate. Payments received from purchasers prior to closing are recorded as deposits. Profit on real estate sold is recognized using the
full accrual method upon closing when the collectability of the sales price is reasonably assured and the Company is not obligated to
perform significant activities after the sale. Profit may be deferred in whole or part until the sale meets the requirements of profit
recognition on sales under this guidance.
44
Share Based Payments
We apply the fair value method of accounting for contingently issued shares and share options issued under our equity incentive
plans. Accordingly, share compensation expense was recorded ratably over the vesting period relating to such contingently issued
shares and options. The Company has elected to recognize compensation expense on a straight-line method over the requisite service
period.
Noncontrolling Interests
Noncontrolling interests are the portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. The
ownership interests in the subsidiary that are held by owners other than the parent are noncontrolling interests. In accordance with
authoritative guidance issued on noncontrolling interests in consolidated financial statements, such noncontrolling interests are
reported on the consolidated balance sheets within equity/capital, separately from the Parent Company’s equity/capital. The guidance
also requires that noncontrolling interests are adjusted each period so that the carrying value equals the greater of its carrying value
based on the accumulation of historical cost or its redemption value. On the consolidated statements of operations, revenues, expenses
and net income or loss from less-than-wholly-owned subsidiaries are reported at the consolidated amounts, including both the amounts
attributable to the Parent Company and noncontrolling interests. Presentation of consolidated equity/capital activity is included for
both quarterly and annual financial statements, including beginning balances, activity for the period and ending balances for
shareholders’ equity/capital, noncontrolling interests and total equity/capital.
Investments in Unconsolidated Real Estate Ventures
The Company accounts for its investments in unconsolidated real estate ventures under the equity method of accounting. Under the
equity method, investments in unconsolidated joint ventures are recorded initially at cost, as investments in real estate entities, and
subsequently adjusted for equity in earnings (losses), cash contributions, less distributions and impairments. On a periodic basis,
management also assesses whether there are any indicators that the fair value of the Company’s investments in unconsolidated real
estate entities may be other than temporarily impaired. An investment is impaired only if the fair value of the investment, as estimated
by management, is less than the carrying value of the investment and the decline is other than temporary. To the extent impairment has
occurred, the loss shall be measured as the excess of the carrying amount of the investment over the fair value of the investment, as
estimated by management. The determination as to whether impairment exists requires significant management judgment about the
fair value of its ownership interest. Fair value is determined through various valuation techniques, including but not limited to,
discounted cash flow models, quoted market values and third party appraisals.
Income Taxes
The Company elected to be taxed as a real estate investment trust under Sections 856-860 of the Internal Revenue Code beginning
with the period from October 21, 2004 (commencement of operations) through December 31, 2004. In management’s opinion, the
requirements to maintain these elections are being met. Accordingly, no provision for federal income taxes has been reflected in the
consolidated financial statements other than for operations conducted through our taxable REIT subsidiaries.
Earnings and profits, which determine the taxability of distributions to shareholders, differ from net income reported for financial
reporting purposes due to differences in cost basis, the estimated useful lives used to compute depreciation, and the allocation of net
income and loss for financial versus tax reporting purposes.
The Company is subject to a 4% federal excise tax if sufficient taxable income is not distributed within prescribed time limits. The
excise tax equals 4% of the annual amount, if any, by which the sum of (a) 85% of the Company’s ordinary income, (b) 95% of the
Company’s net capital gains and c) 100% of prior year taxable income exceeds cash distributions and certain taxes paid by the
Company.
Recent Accounting Pronouncements
In June 2011, the FASB issued an amendment to the accounting standard for the presentation of comprehensive income. The
amendment requires entities to present the total of comprehensive income, the components of net income, and the components of other
comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive
statements. In addition, the amendment requires entities to present on the face of the financial statements reclassification adjustments
for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income
and the components of other comprehensive income are presented. This amendment became effective for fiscal years and interim
periods beginning after December 15, 2011. The Company’s adoption of the new standard as of January 1, 2012 did not have a
material impact on its consolidated financial position or results of operations as the amendment related only to changes in financial
statement presentation.
45
In May 2011, the FASB issued an update to the accounting standard for measuring and disclosing fair value. The update modifies
the wording used to describe the requirements for fair value measuring and for disclosing information about fair value measurements
to improve consistency between U.S. GAAP and International Financial Reporting Standards (“IFRS”). This update is effective for the
annual and interim periods beginning after December 15, 2011. The adoption of this guidance in 2012 did not have a material impact
on our consolidated financial position or results of operations as its impact was limited to disclosure requirements.
Results of Operations
The following discussion of our results of operations should be read in conjunction with the consolidated financial statements and
the accompanying notes thereto. Historical results set forth in the consolidated statements of operations reflect only the existing
facilities and should not be taken as indicative of future operations. The Company considers its same-store portfolio to consist of only
those facilities owned and operated on a stabilized basis at the beginning and at the end of the applicable years presented. We consider
a property to be stabilized once it has achieved an occupancy rate representative of similar self-storage assets in the respective markets
for a full year measured as of the most recent January 1 or has otherwise been placed in-service and has not been significantly
damaged by natural disaster or undergone significant renovation. Same-store results are considered to be useful to investors in
evaluating our performance because they provide information relating to changes in facility-level operating performance without
taking into account the effects of acquisitions, developments or dispositions. At December 31, 2012, there were 313 same-store
properties and 68 non same-store properties, of which 27 were 2011 acquisitions, 37 were 2012 acquisitions and four were properties
that were not stabilized, damaged by natural disaster or had undergone significant renovation. For analytical presentation, all
percentages are calculated using the numbers presented in the financial statements contained in this Annual Report on Form 10-K.
The Company’s results of operations are affected by the acquisition and disposition activity during the 2012, 2011, and 2010
periods as described below. At December 31, 2012, 2011, and 2010, the Company owned 381, 370, and 363 self-storage facilities and
related assets, respectively.
In 2012, 37 self-storage facilities were acquired for approximately $432.3 million (the “2012 Acquisitions”) and 26 self-
storage facilities were sold for approximately $60.0 million (the “2012 Dispositions”).
In 2011, 27 self-storage facilities were acquired for approximately $467.1 million (the “2011 Acquisitions”) and 19 self-
storage facilities were sold for approximately $45.2 million (the “2011 Dispositions”).
In 2010, 12 self-storage facilities were acquired for approximately $85.1 million (the “2010 Acquisitions”) and 16 self-
storage facilities were sold for approximately $38.1 million (the “2010 Dispositions”).
46
Comparison of the Year Ended December 31, 2012 to the Year Ended December 31, 2011 (dollars in thousands)
Same-Store Property Portfolio
---------------------------------------------------------------------
2012
2011
Increase/
(Decrease)
%
Change
Non Same-Store
Properties
--------------------------------------
Other/
Eliminations
---------------------------------
Total Portfolio
----------------------------------------------------------------------
2012
2011
2012
2011
2012
2011
Increase/
(Decrease)
%
Change
$
196,556
20,331
-
216,887
$
191,222
17,811
-
209,033
$
5,334
2,520
-
7,854
3%
14%
-
4%
$
54,403
5,473
-
59,876
$
11,540
1,314
-
12,854
-
$
1,972
4,341
6,313
-
$
1,590
3,768
5,358
$
250,959
27,776
4,341
283,076
$
202,762
20,715
3,768
227,245
$
48,197
7,061
573
55,831
77,466
139,421
77,518
131,515
(52)
7,906
0%
6%
REVENUES:
Rental income
Other property related income
Property management fee income
Total revenues
OPERATING EXPENSES:
Property operating expenses
NET OPERATING INCOME:
Property count
Total square footage
Period End Occupancy (1)
Period Average Occupancy (2)
Realized annual rent per occupied sq ft (3)
313
20,681
84.6%
82.6%
11.51
$
313
20,681
79.1%
79.2%
11.67
$
Depreciation and amortization
General and administrative
Subtotal
Operating income
Other Income (Expense):
Interest:
Interest expense on loans
Loan procurement amortization expense
Loan procurement amortization expense - early repayment of debt
Acquisition related costs
Equity in losses of real estate ventures
Gain from remeasurement of investments in real estate ventures
Other
Total other expense
LOSS FROM CONTINUING OPERATIONS
DISCONTINUED OPERATIONS
Income from discontinued operations
Net gain on disposition of discontinued
operations
Total discontinued operations
NET INCOME
NET LOSS (INCOME) ATTRIBUTABLE TO
NONCONTROLLING INTERESTS
Noncontrolling interests in the Operating
Partnership
Noncontrolling interests in subsidiaries
NET INCOME (LOSS) ATTRIBUTABLE TO THE
COMPANY
19,511
40,365
68
4,804
84.2%
5,090
7,764
57
3,739
75.8%
13,844
(7,531)
12,022
(6,664)
110,821
172,255
381
25,485
84.4%
113,874
26,131
140,005
32,250
(40,715)
(3,279)
-
(3,086)
(745)
7,023
256
(40,546)
94,630
132,615
370
24,420
78.6%
65,955
24,693
90,648
41,967
(33,199)
(5,028)
(8,167)
(3,823)
(281)
-
(83)
(50,581)
24%
34%
15%
25%
17%
30%
16,191
39,640
47,919
1,438
49,357
(9,717)
73%
6%
54%
-23%
(7,516)
1,749
8,167
737
(464)
7,023
339
10,035
-23%
35%
100%
19%
-165%
100%
408%
20%
(8,296)
(8,614)
318
4%
2,113
7,158
(5,045)
-70%
9,811
11,924
3,903
11,061
5,908
863
3,628
2,447
1,181
151%
8%
48%
107
(1,918)
(35)
(2,810)
142
892
406%
32%
$
1,817
$
(398)
$
2,215
557%
(1)
(2)
(3)
Represents occupancy at December 31 of the respective year.
Represents the weighted average occupancy for the period.
Realized annual rent per occupied square foot is computed by dividing rental income by the weighted average occupied square feet for the period. Square footage for non same-store assets acquired during
2012 are prorated based on the portion of the period the properties were owned.
Revenues
Rental income increased from $202.8 million in 2011 to $251.0 million in 2012, an increase of $48.2 million. This increase is
primarily attributable to $42.9 million of additional income from the properties acquired in 2011 and 2012 and an increase in average
occupancy on the same-store portfolio due to lowered rates which contributed to the $5.3 million increase in rental income during
2012 as compared to 2011.
Other property related income increased from $20.7 million in 2011 to $27.8 million in 2012, an increase of $7.1 million, or 34%.
This increase is primarily attributable to increased fee revenue and insurance commissions of $5.6 million during the year ended
47
December 31, 2012 as compared to the year ended December 31, 2011, driven by a $4.2 million increase as a result of the 2011 and
2012 acquisitions.
Property management fee income increased to $4.3 million in 2012 from $3.8 million during 2011, an increase of $0.6 million.
This increase is attributable to an increase in management fees related to the third party management business (133 facilities as of
December 31, 2012 compared to 103 facilities as of December 31, 2011).
Operating Expenses
Property operating expenses increased from $94.6 million in 2011 to $110.8 million in 2012, an increase of $16.2 million, or 17%.
This increase is primarily attributable to $14.4 million of increased expenses associated with newly acquired properties in 2012 as well
as $1.8 million of increased expenses in other/eliminations associated with third party management contracts.
Depreciation and amortization increased from $66.0 million in 2011 to $113.9 million in 2012, an increase of $47.9 million, or
73%. This increase is primarily attributable to depreciation and amortization expense related to the 2011 and 2012 acquisitions,
including an increase in amortization of lease intangibles of $25.2 million recognized during the 2012 period.
Other Income (Expenses)
Interest expense increased from $33.2 million in 2011 to $40.7 million in 2012, an increase of $7.5 million, or 23%. The increase
is attributable to higher average outstanding debt during 2012 primarily resulting from debt associated with the Storage Deluxe
acquisition and other 2012 acquisitions. This increase was offset by lower interest expense related to the repayment of several fixed
rate mortgages during the year. These repayments utilized proceeds from the senior note offering and had higher effective rates than
the effective interest rate of the senior notes.
Loan procurement amortization expense - early repayment of debt was $8.2 million for the year ended December 31, 2011, with no
comparable expense during the 2012 period. This expense is related to the write-off of unamortized loan procurement costs associated
with the Prior Facility.
Equity in losses of real estate ventures was $0.7 million for the year ended December 31, 2012, compared to $0.3 million for the
year ended December 31, 2011. This expense is related to approximately three months of earnings attributable to the HSRE Venture
during the 2011 period compared to nine months of earnings during the 2012 period.
Gain from remeasurement of investments in real estate ventures was $7.0 million for the year ended December 31, 2012, with no
comparable gains during the 2011 period. This gain is related to the HSREV interest remeasurement discussed in Item 1, from the
purchase of the remaining 50% ownership in the venture.
Discontinued Operations
Income from discontinued operations decreased from $7.2 million for the year ended December 31, 2011 to $2.1 million for the
year ended December 31, 2012. The income during the 2012 period represents the results of operations during the year for the 26
assets sold during 2012. Income during the 2011 period represents the results of operations during the year for the 26 assets sold
during 2012 and the 19 assets sold during 2011. Gains on disposition of discontinued operations increased from $3.9 million during
2011 to $9.8 million during 2012. These gains are determined on a transactional basis and accordingly are not comparable across
reporting periods.
Noncontrolling Interests in Subsidiaries
Net income attributable to noncontrolling interests in subsidiaries decreased to $1.9 million in the 2012 period from $2.8 million in
the 2011 period, primarily as a result of the Company purchasing the remaining 50% interest from Heitman in 2012. The 2011 period
represents twelve months of operations of the venture, compared to 2012, which represented operations through August 13, 2012.
48
Comparison of the Year Ended December 31, 2011 to the Year Ended December 31, 2010 (dollars in thousands)
REVENUES:
Rental income
Other property related income
Property management fee income
Total revenues
OPERATING EXPENSES:
Property operating expenses
NET OPERATING INCOME:
Same-Store Property Portfolio
----------------------------------------------------------------------
2011
2010
Increase/
(Decrease)
%
Change
$
191,222
17,811
-
209,033
$
179,568
14,824
-
194,392
$
11,654
2,987
-
14,641
77,518
131,515
74,865
119,527
2,653
11,988
6%
20%
-
8%
4%
10%
Property count
Total square footage
Period End Occupancy (1)
Period Average Occupancy (2)
Realized annual rent per occupied sq ft (3)
313
20,681
79.1%
79.2%
11.67
$
313
20,681
77.0%
77.2%
11.25
$
Depreciation and amortization
General and administrative
Subtotal
Operating income
Other Income (Expense):
Interest:
Interest expense on loans
Loan procurement amortization expense
Loan procurement amortization expense - early repayment of debt
Acquisition related costs
Equity in losses of real estate ventures
Other
Total other expense
LOSS FROM CONTINUING OPERATIONS
DISCONTINUED OPERATIONS
Income from discontinued operations
Net gain on disposition of discontinued
operations
Total discontinued operations
NET INCOME (LOSS)
NET LOSS (INCOME) ATTRIBUTABLE TO
NONCONTROLLING INTERESTS
Noncontrolling interests in the Operating
Partnership
Noncontrolling interests in subsidiaries
NET LOSS ATTRIBUTABLE TO THE
COMPANY
Non Same-Store
Properties
----------------------------------
Other/
Eliminations
---------------------------------
Total Portfolio
----------------------------------------------------------------------
2011
2010
2011
2010
2011
2010
Increase/
(Decrease)
%
Change
$
11,540
1,314
-
12,854
$
180
1,698
-
1,878
-
$
1,590
3,768
5,358
-
$
592
2,829
3,421
$
202,762
20,715
3,768
227,245
$
179,748
17,114
2,829
199,691
$
23,014
3,601
939
27,554
12,022
(6,664)
9,231
(5,810)
5,090
7,764
57
3,739
75.8%
1,683
195
50
2,954
71.4%
94,630
132,615
370
24,420
78.6%
85,779
113,912
363
23,635
76.3%
8,851
18,703
13%
21%
33%
14%
10%
16%
65,955
24,693
90,648
41,967
58,876
25,406
84,282
29,630
7,079
(713)
6,366
12,337
12%
-3%
8%
42%
(33,199)
(5,028)
(8,167)
(3,823)
(281)
(83)
(50,581)
(37,794)
(6,463)
-
(759)
-
386
(44,630)
4,595
1,435
(8,167)
(3,064)
(281)
(469)
(5,951)
12%
22%
100%
-404%
100%
122%
-13%
(8,614)
(15,000)
6,386
43%
7,158
7,155
3
0%
3,903
11,061
1,826
8,981
2,077
2,080
2,447
(6,019)
8,466
114%
23%
141%
(35)
(2,810)
381
(1,755)
(416)
(1,055)
-109%
-60%
$
(398)
$
(7,393)
$
6,995
95%
(1)
(2)
(3)
Represents occupancy at December 31 of the respective year.
Represents the weighted average occupancy for the period.
Realized annual rent per occupied square foot is computed by dividing rental income by the weighted average occupied square feet for the period. Square footage for non same-store assets acquired during
2012 are prorated based on the portion of the period the properties were owned.
Revenues
Rental income increased from $179.7 million in 2010 to $202.8 million in 2011, an increase of $23.0 million. This increase is
primarily attributable to $11.4 million of additional income from the properties acquired in 2010 and 2011 and increases in average
occupancy and scheduled annual rent per square foot on the same-store portfolio which contributed $11.7 million to the increase in
rental income during 2011 as compared to 2010.
Other property related income increased from $17.1 million in 2010 to $20.7 million in 2011, an increase of $3.6 million, or 21%.
This increase is primarily attributable to increased fee revenue and insurance commissions of $3.7 million offset by a decrease in other
property related income of $0.4 million related to the 2010 and 2011 acquisitions.
49
Property management fee income increased to $3.8 million in 2011 from $2.8 million during 2010, an increase of $1.0 million.
This increase is attributable to an increase in management fees related to the third party management business (103 facilities as of
December 31, 2011 compared to 93 facilities as of December 31, 2010) and 12 months of management fees earned during the 2011
period related to the addition of 85 management contracts in April 2010, compared to eight months of similar activity during the 2010
period.
Operating Expenses
Property operating expenses increased from $85.8 million in 2010 to $94.6 million in 2011, an increase of $8.9 million, or 10%.
This increase is primarily attributable to $6.2 million of increased expenses associated with newly acquired properties and 12 months
of expenses in the 2011 period related to the addition of 85 management contracts in April 2010, compared to only eight months of
similar expenses in the 2010 period. In addition, we experienced a $0.4 million increase in rebranding and store upgrade related
expenses during the 2011 period as compared to the 2010 period.
Depreciation and amortization increased from $58.9 million in 2010 to $66.0 million in 2011, an increase of $7.1 million, or 12%.
This increase is primarily attributable to depreciation and amortization expense related to the 2010 and 2011 acquisitions recognized
in 2011, with no corresponding expense recognized in 2010.
Other Income (Expenses)
Interest expense decreased from $37.8 million in 2010 to $33.2 million in 2011, a decrease of $4.6 million, or 12%. Approximately
$1.6 million of the reduced interest expense related to approximately $210 million of net mortgage loan repayments during the period
from January 1, 2010 through December 31, 2011. Interest expense also decreased as a result of lower interest rates on the 2011
Credit Facility during the 2011 period as compared to the interest rates on the Prior Facility during the 2010 period, offset by
increased unsecured loan borrowings during the period.
Loan procurement amortization expense - early repayment of debt was $8.2 million for the year ended December 31, 2011, with no
comparable expense during the 2010 period. This expense is related to the write-off of unamortized loan procurement costs associated
with the Prior Facility.
Acquisition related costs increased from $0.8 million during 2010 to $3.8 million during 2011 as a result of the acquisition of 27
self-storage facilities in 2011, including 16 facilities in the Storage Deluxe Acquisition, compared to 12 acquisitions during 2010.
Equity in losses of real estate ventures was $0.3 million for the year ended December 31, 2011, with no comparable expense during
the 2010 period. This expense is related to earnings attributable to the HSRE Venture, which was formed in September 2011.
Discontinued Operations
Gains on disposition of discontinued operations increased from $1.8 million in the 2010 period to $3.9 million in the 2011 period,
an increase of $2.1 million. Gains during 2010 related to the sale of 16 assets during 2010, and gains during 2011 related to the sale of
19 assets during 2011.
Noncontrolling Interests in Subsidiaries
Noncontrolling interests in subsidiaries increased to $2.8 million in the 2011 period from $1.8 million in the 2010 period. This
increase is primarily a result of increased income related to the operations of our joint venture (“HART”), which was formed in
August 2009 to own and operate 22 self-storage facilities. The Company retained a 50% ownership interest in HART and accordingly
presents the 50% of the related results that are allocated to the venture partner as an adjustment to net income (loss) when arriving at
net income (loss) attributable to shareholders.
50
Non-GAAP Financial Measures
NOI
We define net operating income, which we refer to as “NOI,” as total continuing revenues less continuing property operating
expenses. NOI also can be calculated by adding back to net income (loss): interest expense on loans, loan procurement amortization
expense, loan procurement amortization expense — early repayment of debt, acquisition related costs, equity in losses of real estate
ventures, amounts attributable to noncontrolling interests, other expense, depreciation and amortization expense, general and
administrative expense, and deducting from net income: income from discontinued operations, gains on disposition of discontinued
operations, other income, gain on remeasurement of investment in real estate ventures and interest income. NOI is not a measure of
performance calculated in accordance with GAAP.
We use NOI as a measure of operating performance at each of our facilities, and for all of our facilities in the aggregate. NOI should
not be considered as a substitute for operating income, net income, cash flows provided by operating, investing and financing
activities, or other income statement or cash flow statement data prepared in accordance with GAAP.
We believe NOI is useful to investors in evaluating our operating performance because:
It is one of the primary measures used by our management and our facility managers to evaluate the economic productivity of
our facilities, including our ability to lease our facilities, increase pricing and occupancy and control our property operating
expenses;
It is widely used in the real estate industry and the self-storage industry to measure the performance and value of real estate
assets without regard to various items included in net income that do not relate to or are not indicative of operating performance,
such as depreciation and amortization, which can vary depending upon accounting methods and the book value of assets; and
We believe it helps our investors to meaningfully compare the results of our operating performance from period to period by
removing the impact of our capital structure (primarily interest expense on our outstanding indebtedness) and depreciation of our
basis in our assets from our operating results.
There are material limitations to using a measure such as NOI, including the difficulty associated with comparing results among
more than one company and the inability to analyze certain significant items, including depreciation and interest expense, that directly
affect our net income. We compensate for these limitations by considering the economic effect of the excluded expense items
independently as well as in connection with our analysis of net income. NOI should be considered in addition to, but not as a
substitute for, other measures of financial performance reported in accordance with GAAP, such as total revenues, operating income
and net income.
FFO
Funds from operations (“FFO”) is a widely used performance measure for real estate companies and is provided here as a
supplemental measure of operating performance. The April 2002 National Policy Bulletin of the National Association of Real Estate
Investment Trusts (the “White Paper”), as amended, defines FFO as net income (computed in accordance with GAAP), excluding
gains (or losses) from sales of property and real estate related impairment charges, plus real estate depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures.
Management uses FFO as a key performance indicator in evaluating the operations of the Company’s facilities. Given the nature of
its business as a real estate owner and operator, the Company considers FFO a key measure of its operating performance that is not
specifically defined by accounting principles generally accepted in the United States. The Company believes that FFO is useful to
management and investors as a starting point in measuring its operational performance because it excludes various items included in
net income that do not relate to or are not indicative of its operating performance such as gains (or losses) from sales of property, gains
on remeasurement of investment in real estate ventures, impairments of depreciable assets, and depreciation, which can make periodic
and peer analyses of operating performance more difficult. Our computation of FFO may not be comparable to FFO reported by other
REITs or real estate companies.
51
FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our
performance. FFO does not represent cash generated from operating activities determined in accordance with GAAP and is not a
measure of liquidity or an indicator of our ability to make cash distributions. We believe that to further understand our performance,
FFO should be compared with our reported net income and considered in addition to cash flows computed in accordance with GAAP,
as presented in our Consolidated Financial Statements.
FFO, as adjusted
FFO, as adjusted represents FFO as defined above, excluding the effects of acquisition related costs, gains or losses from early
extinguishment of debt, and other non-recurring items, which we believe are not indicative of the Company’s operating results.
The following table presents a reconciliation of loss to FFO and FFO, as adjusted, for the year ended December 31, 2012 and 2011
(in thousands):
Net loss attributable to common shareholders ...........................................
$
(4,191) $
(1,616)
2012
2011
Add (deduct):
Real estate depreciation and amortization:
Real property - continuing operations ......................................................
Real property - discontinued operations ..................................................
Company’s share of unconsolidated real estate ventures .........................
Noncontrolling interest’s share of consolidated real estate ventures .......
Gains on sale of real estate .......................................................................
Gain on remeasurement of investment in real estate venture ...................
Noncontrolling interests in the Operating Partnership .............................
FFO
Add (deduct):
112,449
1,504
1,540
(1,049)
(9,811)
(7,023)
(107)
64,319
3,116
542
(1,731)
(3,903)
—
35
$
93,312
$
60,762
Loan procurement amortization expense - early repayment of debt ........
Discontinued operations - settlement proceeds ........................................
Acquisition related costs ..........................................................................
—
—
3,086
8,167
(1,895)
3,823
FFO, as adjusted .........................................................................................
$
96,398
$
70,857
Weighted-average diluted shares and units outstanding ..............................
131,021
109,085
Cash Flows
Comparison of the Year Ended December 31, 2012 to the Year Ended December 31, 2011
A comparison of cash flow related to operating, investing and financing activities for the years ended December 31, 2012 and 2011
is as follows:
Net cash provided by (used in):
Year Ended December 31,
2011
2012
(in thousands)
Change
Operating activities ............................
Investing activities .............................
Financing activities ............................
$
$
$
118,428
$
(271,936) $
$
148,934
84,327
$
(442,100) $
$
360,951
34,101
170,164
(212,017)
Cash provided by operating activities for the years ended December 31, 2012 and 2011 were $118.4 million and $84.3 million,
respectively, an increase of $34.1 million. Our increased cash flow from operating activities is primarily attributable to our 2012
acquisitions and increased net operating income levels on the same-store portfolio in the 2012 period as compared to the 2011 period.
52
Cash used in investing activities was $271.9 million in 2012 and $442.1 million in 2011. Cash used in 2012 relates to the
acquisition of 28 properties purchased during the year with a purchase price totaling $330.3 million (which includes assumed debt of
$107.0 million) and 9 properties purchased related to the acquisition of the remaining interest in the HSREV real estate venture during
2012. Cash used to fund these acquisitions was offset by $52.6 million in net cash proceeds from the disposition of 26 properties
during the year. Cash used in 2011 relates to the acquisition of 27 properties purchased during the year with a purchase price totaling
$467.1 million (which includes 16 Storage Deluxe properties acquired for $357.3 million).
Cash provided by financing activities decreased to $148.9 million in 2012 from $361.0 million in 2011, a decrease of $212.0
million. During 2012 and 2011, we issued common shares for net proceeds of $102.1 million and $204.0 million, respectively.
Additionally, proceeds from revolving credit facility and unsecured term loans were $503.0 million in 2012 compared to $656.7
million during 2011, and principal payments on revolving credit facility, unsecured term loans and mortgages totaled $594.3 million
during 2012 compared to $539.0 million during 2011. These decreases were offset by proceeds received during 2012 relating to the
unsecured senior notes of $249.6 million. The proceeds were used to fund increased acquisition activity during 2012, including $61.1
million paid to acquire the noncontrolling interest in the HART joint venture.
Comparison of the Year Ended December 31, 2011 to the Year Ended December 31, 2010
A comparison of cash flow related to operating, investing and financing activities for the years ended December 31, 2011 and 2010
is as follows:
Net cash provided by (used in):
Year Ended December 31,
2010
2011
(in thousands)
Change
Operating activities ............................
Investing activities .............................
Financing activities ............................
$
$
$
$
84,327
(442,100) $
$
360,951
$
71,517
(44,783) $
(123,611) $
12,810
(397,317)
484,562
Cash provided by operating activities for the years ended December 31, 2011 and 2010 were $84.3 million and $71.5 million,
respectively, an increase of $12.8 million. Our principal source of cash flows is from the operation of our properties. Our increased
cash flow from operating activities is primarily attributable to our 2010 and 2011 acquisitions.
Cash used in investing activities increased from $44.8 million in 2010 to $442.1 million in 2011, an increase of $397.3 million.
The increase primarily relates to increased property acquisitions in 2011 (Storage Deluxe Acquisition with a purchase price totaling
$357.3 million and 11 other property acquisitions with purchase prices totaling $109.8 million) compared to 2010 (12 property
acquisitions with purchase price totaling $85.1 million).
Cash provided by (used in) financing activities increased from ($123.6) million in 2010 to $361.0 million in 2011, an increase of
$484.6 million. The increase relates to the following: (a) increased common and preferred share issuances of $231.3 million in 2011,
as compared to 2010, primarily used to finance the Storage Deluxe Acquisition in November 2011, (b) a net increase in unsecured
term loans of $200.0 million that was used to repay $93 million of borrowings under the revolving credit facility related to the
financing of the Storage Deluxe Acquisition, and (c) a net decrease in payments on mortgage loans and notes payable of $156.9
million; offset by full repayment of revolving credit facility borrowings of $43 million during 2011, compared to prior year inflows of
$43 million, and increased distributions of $19.3 million in 2011 as compared to 2010.
Liquidity and Capital Resources
Liquidity Overview
Our cash flow from operations has historically been one of our primary sources of liquidity to fund debt service, distributions and
capital expenditures. We derive substantially all of our revenue from customers who lease space from us at our facilities and fees
earned from managing properties. Therefore, our ability to generate cash from operations is dependent on the rents that we are able to
charge and collect from our customers. We believe that the facilities in which we invest — self-storage facilities — are less sensitive
than other real estate product types to near-term economic downturns. However, prolonged economic downturns will adversely affect
our cash flows from operations.
In order to qualify as a REIT for federal income tax purposes, the Parent Company is required to distribute at least 90% of REIT
taxable income, excluding capital gains, to our shareholders on an annual basis or pay federal income tax. The nature of our business,
coupled with the requirement that the Parent Company distribute a substantial portion of our income on an annual basis, will cause us
to have substantial liquidity needs over both the short term and the long term.
53
Our short-term liquidity needs consist primarily of funds necessary to pay operating expenses associated with our facilities,
refinancing of certain mortgage indebtedness, interest expense and scheduled principal payments on debt, expected distributions to
limited partners and shareholders and recurring capital expenditures. These funding requirements will vary from year to year, in some
cases significantly. We expect recurring capital expenditures in the 2013 fiscal year to be approximately $7 million to $10 million.
Our currently scheduled principal payments on debt, including borrowings outstanding on the 2011 Credit Facility and Term Loan
Facility, are approximately $30.1 million in 2013.
Our most restrictive debt covenants limit the amount of additional leverage we can add; however, we believe cash flow from
operations, access to our “at the market” program and access to our 2011 Credit Facility are adequate to execute our current business
plan and remain in compliance with our debt covenants.
Our liquidity needs beyond 2013 consist primarily of contractual obligations which include repayments of indebtedness at maturity,
as well as potential discretionary expenditures such as (i) non-recurring capital expenditures; (ii) redevelopment of operating facilities;
(iii) acquisitions of additional facilities; and (iv) development of new facilities. We will have to satisfy our needs through either
additional borrowings, including borrowings under the revolving portion of our 2011 Credit Facility, sales of common or preferred
shares and/or cash generated through facility dispositions and joint venture transactions.
Notwithstanding the discussion above, we believe that, as a publicly traded REIT, we will have access to multiple sources of capital
to fund long-term liquidity requirements, including the incurrence of additional debt and the issuance of additional equity. However,
we cannot provide any assurance that this will be the case. Our ability to incur additional debt will be dependent on a number of
factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by
lenders. In addition, dislocation in the United States debt markets may significantly reduce the availability and increase the cost of
long-term debt capital, including conventional mortgage financing and commercial mortgage-backed securities financing. There can
be no assurance that such capital will be readily available in the future. Our ability to access the equity capital markets will be
dependent on a number of factors as well, including general market conditions for REITs and market perceptions about us.
As of December 31, 2012, we had approximately $4.5 million in available cash and cash equivalents. In addition, we had
approximately $254.8 million of availability for borrowings under our 2011 Credit Facility.
Bank Credit Facilities
On June 26, 2012, the Operating Partnership issued $250 million in aggregate principal amount of unsecured senior notes due
July 15, 2022 (the “senior notes”) which bear interest at a rate of 4.80%. The senior notes had an effective interest rate of 4.82% at
December 31, 2012. The indenture under which the unsecured senior notes were issued restricts the ability of the Operating
Partnership and its subsidiaries to incur debt unless the Operating Partnership and its consolidated subsidiaries comply with a leverage
ratio not to exceed 60% and an interest coverage ratio of less than 1.5:1 after giving effect to the incurrence of the debt. The indenture
also restricts the ability of the Operating Partnership and its subsidiaries to incur secured debt unless the Operating Partnership and its
consolidated subsidiaries comply with a secured debt leverage ratio not to exceed 40% after giving effect to the incurrence of the
debt. The indenture also contains other financial and customary covenants, including a covenant not to own unencumbered assets
with a value less than 150% of the unsecured indebtedness of the Operating Partnership and its consolidated subsidiaries. The
Operating Partnership is currently in compliance with all of the financial covenants under the senior notes.
On September 29, 2010, we amended the Prior Facility. The Prior Facility, as amended, consisted of a $200 million unsecured term
loan and a $250 million unsecured revolving credit facility and had an outstanding balance of $43 million as of December 31, 2010.
The Prior Facility, as amended had a three-year term expiring on December 7, 2013, was unsecured, and borrowings on the facility
incurred interest on a borrowing spread determined by our leverage levels plus LIBOR.
On June 20, 2011, we entered into an unsecured Term Loan Agreement (the “Term Loan Facility”) which consisted of a $100
million term loan with a five-year maturity and a $100 million term loan with a seven-year maturity. The Term Loan Facility permits
the Company to request additional advances of five-year or seven-year loans in minimum increments of $5 million provided that the
aggregate of such additional advances does not exceed $50 million. We incurred costs of $2.1 million in connection with executing
the agreement and capitalized such costs as a component of loan procurement costs, net of amortization on the consolidated balance
sheet. Pricing on the Term Loan Facility ranges, depending on the Company’s leverage levels, from 1.90% to 2.75% over LIBOR for
the five-year loan, and from 2.05% to 2.85% over LIBOR for the seven-year loan, and each loan has no LIBOR floor. As of
December 31, 2011, the Company had received two investment grade ratings, and therefore pricing on the Term Loan Facility ranges
from 1.45% to 2.10% over LIBOR for the five-year loan, and from 1.60% to 2.25% over LIBOR for the seven-year loan.
54
On December 9, 2011, we entered into a new credit facility comprised of a $100 million unsecured term loan maturing in
December 2014; a $200 million unsecured term loan maturing in March 2017; and a $300 million unsecured revolving facility
maturing in December 2015 (the “Credit Facility”). The Credit Facility replaces in its entirety our previous facility.
Pricing on the Credit Facility depends on our unsecured debt credit rating. At our current Baa3/BBB- level, amounts drawn under
the revolving facility are priced at 1.48% over LIBOR, with no LIBOR floor. Amounts drawn under the term loan portion of the
Credit Facility are priced at 1.75% over LIBOR, with no LIBOR floor.
As of December 31, 2012, $200 million of unsecured term loan borrowings were outstanding under the Term Loan Facility, $300
million of unsecured term loan and $45 million of unsecured revolving loan borrowings were outstanding under the Credit Facility,
and $254.8 million was available for borrowing on the unsecured revolving portion of the Credit Facility. We had interest rate swaps
as of December 31, 2012, that fix LIBOR on $200 million of borrowings under the Credit Facility maturing in March 2017 at 1.34%.
In addition, at December 31, 2012, we had interest rate swaps that fix LIBOR on both the five and seven-year term loans under the
Term Loan Facility through their respective maturity dates. The interest rate swap agreements fix thirty day LIBOR over the terms of
the five and seven-year term loans at 1.80% and 2.47%, respectively. As of December 31, 2012, borrowings under the Credit Facility
and Term Loan Facility had a weighted average interest rate of 3.15%.
The Term Loan Facility and the term loans under the Credit Facility were fully drawn at December 31, 2012, and no further
borrowings may be made under those term loans. The Company’s ability to borrow under the revolving portion of the Credit Facility
is subject to ongoing compliance with certain financial covenants which include:
Maximum total indebtedness to total asset value of 60.0% at any time;
Minimum fixed charge coverage ratio of 1.50:1.00; and
Minimum tangible net worth of $821,211,200 plus 75% of net proceeds from equity issuances after June 30, 2010.
Further, under the Credit Facility and Term Loan Facility, we are restricted from paying distributions on our common shares that
would exceed an amount equal to the greater of (i) 95% of our funds from operations, and (ii) such amount as may be necessary to
maintain the Parent Company’s REIT status.
We are currently in compliance with all of our financial covenants and anticipate being in compliance with all of our financial
covenants through the terms of the Credit Facility and Term Loan Facility.
At The Market Program.
Pursuant to our sales agreement with Cantor Fitzgerald & Co. (the “Sales Agent”), dated April 3, 2009, as amended on January 26,
2011 and September 16, 2011 (as amended, the “Sales Agreement”), we may sell up to 20 million common shares at “at the market”
prices. During the year ended December 31, 2012, we sold 7.9 million common shares with an average sales price of $13.13 per share,
resulting in gross proceeds of $103.8 million under the program ($163.8 million of gross proceeds and 16.1 million shares sold with an
average sales price of $10.16 since program inception in 2009). The Company incurred $1.7 million of offering costs in conjunction
with the 2012 sales. The proceeds from the sales conducted during the year ended December 31, 2012 were used to fund acquisitions
and pay down long-term debt. As of December 31, 2012, 3.9 million common shares remain available for issuance under the Sales
Agreement.
55
Other Material Changes in Financial Position
Selected Assets
Storage facilities, net ............................................
Investment in real estate ventures, at equity .........
Selected Liabilities
Unsecured senior notes .........................................
Revolving credit facility ......................................
Unecured term loans ............................................
Mortgage loans and notes payable ........................
Accounts payable, accrued expenses and other
liabilities ...........................................................
December 31,
2012
2011
(in thousands)
Increase
(decrease)
$
$
$
$
$
$
$
2,089,707
—
250,000
45,000
500,000
228,759
60,708
$
$
$
$
$
$
$
1,788,720
15,181
—
—
400,000
358,441
51,025
$
$
$
$
$
$
$
300,987
(15,181)
250,000
45,000
100,000
(129,682)
9,683
Storage facilities, net increased $301.0 million during 2012 primarily as a result of the acquisition of 37 facilities and fixed asset
additions, offset by the disposition of 26 properties during the same period. Investment in real estate ventures, at equity decreased by
$15.2 million due to the purchase of the remaining 50% ownership in HSREV during 2012. As a result of the acquisition, these
properties are now included in Storage facilities, net.
Unsecured senior notes increased $250 million due to the issuance of $250 million in aggregate principal amount of unsecured
senior notes due July 15, 2022 during 2012. Our borrowing under the revolving portion of the 2011 Credit Facility increased $45.0
million as a result of additional borrowings made to help fund the 2012 acquisitions and repayment of multiple mortgages during the
year. Unsecured term loan borrowing increased by $100 million due to borrowings under the 2011 Credit Facility related to payments
for the 2012 Acquisitions and the repayment of multiple mortgages in 2012.
Mortgage loans and notes payable decreased $129.7 million due to scheduled principal payments and the repayment of several
mortgages during the year. Accounts payable, accrued expenses and other liabilities increased $9.7 million primarily due to an
increase in derivative liabilities during 2012.
Contractual Obligations
The following table summarizes our known contractual obligations as of December 31, 2012 (in thousands):
Total
2013
2014
2015
2016
2017
2018 and
thereafter
Payments Due by Period
Mortgage loans and notes
payable (a)............................
$ 224,433 $
30,136 $
12,149 $
86,689 $
21,261 $
1,863 $ 72,335
Revolving credit facility and
unsecured term loans ............
Unsecured senior notes ............
Interest payments (b)................
Ground leases and third party
office lease ...........................
Related party office leases .......
Software and service
contracts ...............................
Construction commitments ......
545,000
250,000
221,342
61,933
998
2,451
13,470
$ 1,319,627 $
—
—
39,497
1,206
499
2,451
13,470
87,259 $
100,000
—
37,105
1,192
499
—
—
45,000
—
33,532
1,191
—
—
—
150,945 $
166,412 $
100,000
—
26,843
1,182
—
200,000
—
19,458
100,000
250,000
64,907
1,192
—
55,970
—
—
—
—
—
149,286 $ 222,513 $ 543,212
—
—
(a) Amounts do not include unamortized discounts/premiums.
(b) Interest under the Credit Facility and Term Loan Facility calculated using a weighted average rate of 3.15%.
56
We expect that the contractual obligations owed in 2013 will be satisfied by a combination of cash generated from operations and
from draws on the revolving portion of the 2011 Credit Facility.
Off-Balance Sheet Arrangements
We do not have off-balance sheet arrangements, financings, or other relationships with other unconsolidated entities (other than our
co-investment partnerships) or other persons, also known as variable interest entities not previously discussed.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company’s future income, cash flows and fair values relevant to financial instruments depend upon prevailing interest rates.
Market Risk
Our investment policy relating to cash and cash equivalents is to preserve principal and liquidity while maximizing the return
through investment of available funds.
Effect of Changes in Interest Rates on our Outstanding Debt
Our interest rate risk objectives are to limit the impact of interest rate fluctuations on earnings and cash flows and to lower our
overall borrowing costs. To achieve these objectives, we manage our exposure to fluctuations in market interest rates for a portion of
our borrowings through the use derivative financial instruments such as interest rate swaps or caps to mitigate our interest rate risk on
a related financial instrument or to effectively lock the interest rate on a portion of our variable rate debt.
The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market rates. The
range of changes chosen reflects our view of changes which are reasonably possible over a one-year period. Market values are the
present value of projected future cash flows based on the market rates chosen.
As of December 31, 2012 our consolidated debt consisted of $873.3 million of outstanding mortgages, unsecured senior notes and
unsecured term loans that are subject to fixed rates, including variable rate debt that is effectively fixed through our use of interest rate
swaps. There was $150.4 million of outstanding credit facility borrowings subject to floating rates. Changes in interest rates have
different impacts on the fixed and variable rate portions of our debt portfolio. A change in interest rates on the fixed portion of the
debt portfolio impacts the net financial instrument position, but has no impact on interest incurred or cash flows. A change in interest
rates on the variable portion of the debt portfolio impacts the interest incurred and cash flows, but does not impact the net financial
instrument position.
If market rates of interest on our variable rate debt increase by 100 basis points, the increase in annual interest expense on our
variable rate debt would decrease future earnings and cash flows by approximately $1.5 million a year. If market rates of interest on
our variable rate debt decrease by 100 basis points, the decrease in interest expense on our variable rate debt would increase future
earnings and cash flows by approximately $1.5 million a year.
If market rates of interest increase by 1%, the fair value of our outstanding fixed-rate mortgage debt and unsecured term loans
would decrease by approximately $29.8 million. If market rates of interest decrease by 1%, the fair value of our outstanding fixed-rate
mortgage debt and unsecured term loans would increase by approximately $32.0 million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements required by this item appear with an Index to Financial Statements and Schedules, starting on page F-1 of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
57
ITEM 9A. CONTROLS AND PROCEDURES
Controls and Procedures (Parent Company)
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the Parent Company carried out an evaluation, under the supervision and with the
participation of its management, including its chief executive officer and chief financial officer, of the effectiveness of the design and
operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)).
Based on that evaluation, the Parent Company’s chief executive officer and chief financial officer have concluded that the Parent
Company’s disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable
assurance that information required to be disclosed by the Parent Company in reports that it files or submits under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is
accumulated and communicated to the Parent Company’s management, including its chief executive officer and chief financial officer,
as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Controls Over Financial Reporting
There has been no change in the Parent Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act) during its most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal
control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Management’s report on internal control over financial reporting is set forth on page F-2 of this Annual Report on Form 10-K, and
is incorporated herein by reference. The effectiveness of the Parent Company’s internal control over financial reporting as of
December 31, 2012 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in its report which is
included herein.
Controls and Procedures (Operating Partnership)
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the Operating Partnership carried out an evaluation, under the supervision and
with the participation of its management, including the Operating Partnership’s chief executive officer and chief financial officer, of
the effectiveness of the design and operation of the Operating Partnership’s disclosure controls and procedures (as defined in
Rules 13a-15(e) under the Exchange Act).
Based on that evaluation, the Operating Partnership’s chief executive officer and chief financial officer have concluded that the
Operating Partnership’s disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide
reasonable assurance that information required to be disclosed by the Operating Partnership in reports that it files or submits under the
Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that
such information is accumulated and communicated to the Operating Partnership’s management, including the Operating
Partnership’s chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required
disclosure.
Changes in Internal Controls Over Financial Reporting
There has been no change in the Operating Partnership’s internal control over financial reporting (as defined in Rule 13a-
15(f) under the Exchange Act) during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially
affect, the Operating Partnership’s internal control over financial reporting.
58
Management’s Report on Internal Control Over Financial Reporting
Management’s report on internal control over financial reporting is set forth on page F-2 of this Annual Report on Form 10-K, and
is incorporated herein by reference. The effectiveness of the Operating Partnership’s internal control over financial reporting as of
December 31, 2012 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in its report which is
included herein.
ITEM 9B. OTHER INFORMATION
Not applicable.
ITEM 10. TRUSTEES, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
We have adopted a Code of Ethics for all of our employees, officers and trustees, including our principal executive officer and
principal financial officer, which is available on our website at www.cubesmart.com. We intend to disclose any amendment to, or a
waiver from, a provision of our Code of Ethics on our website within four business days following the date of the amendment or
waiver.
The remaining information required by this item regarding trustees, executive officers and corporate governance is hereby
incorporated by reference to the material appearing in the Proxy Statement for the Annual Shareholders Meeting to be held in 2012
(the “Proxy Statement”) under the captions “Proposal 1: Election of Trustees,” “Executive Officers,” “Meetings and Committees of
the Board of Trustees,” and “Shareholder Proposals and Nominations for the 2014 Annual Meeting.” The information required by this
item regarding compliance with Section 16(a) of the Exchange Act is hereby incorporated by reference to the material appearing in the
Parent Company’s Proxy Statement under the caption “Section 16(a) Beneficial Ownership Reporting Compliance.”
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is hereby incorporated by reference to the material appearing in the Parent Company’s Proxy
Statement under the captions “Compensation Committee Report,” “Meetings and Committees of the Board of Trustees —
Compensation Committee Interlocks and Insider Participation,” “Compensation Discussion and Analysis,” “Executive
Compensation,” “Potential Payments Upon Termination or Change in Control,” and “Trustee Compensation.”
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
SHAREHOLDER MATTERS
The following table sets forth certain information regarding our equity compensation plans as of December 31, 2012.
Plan Category
Equity compensation plans approved by
shareholders ............................................
Equity compensation plans not approved
by shareholders ...................................
Total ........................................................
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(a)
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
Number of securities remaining
available for future issuance under
equity compensation plans
(excluding securities
reflected in column(a)
(c)
5,257,864(1) $
10.50(2)
—
5,257,864
$
—
10.50
3,191,615
—
3,191,615
(1)
(2)
Excludes 1,284,401 shares subject to outstanding restricted share unit awards.
This number reflects the weighted-average exercise price of outstanding options and has been calculated exclusive
of outstanding restricted unit awards.
59
The information regarding security ownership of certain beneficial owners and management required by this item is hereby
incorporated by reference to the material appearing in the Parent Company’s Proxy Statement under the caption “Security Ownership
of Management” and “Security Ownership of Beneficial Owners.”
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND TRUSTEE INDEPENDENCE
The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement under the
captions “Corporate Governance- Independence of Trustees,” “Policies and Procedures Regarding Review, Approval or Ratification
of Transactions With Related Persons,” and “Transactions With Related Persons.”
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is hereby incorporated by reference to the material appearing in the Parent Company’s Proxy
Statement under the captions “Audit Committee Matters - Fees Paid to Our Independent Registered Public Accounting Firm” and “—
Audit Committee Pre-Approval Policies and Procedures.”
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a) Documents filed as part of this report:
1. Financial Statements.
The response to this portion of Item 15 is submitted as a separate section of this report.
2. Financial Statement Schedules.
The response to this portion of Item 15 is submitted as a separate section of this report.
3. Exhibits.
The list of exhibits filed with this report is set forth in response to Item 15(b). The required exhibit index has been filed with
the exhibits.
(b) Exhibits. The following documents are filed as exhibits to this report:
3.1*
3.2*
3.3*
3.4*
3.5*
3.6*
3.7*
Articles of Amendment and Restatement of Declaration of Trust of U-Store-It Trust, incorporated by reference to
Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on November 2, 2004.
Articles of Amendment of Declaration of Trust of CubeSmart, dated September 14, 2012, incorporated by reference to
Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on September 16, 2012.
Articles Supplementary to Declaration of Trust of CubeSmart classifying and designating CubeSmart’s 7.75% Series A
Cumulative Redeemable Preferred Shares of Beneficial Interest, incorporated by reference to Exhibit 3.3 to
CubeSmart’s Form 8-A, filed on October 31, 2012.
Third Amended and Restated Bylaws of CubeSmart, effective September 14, 2012, incorporated by reference to
Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed on September 16, 2012.
Certificate of Limited Partnership of U-Store-It, L.P., incorporated by reference to Exhibit 3.1 to CubeSmart, L.P.’s
Registration Statement on Form 10, filed on July 15, 2012.
Amendment No. 1 to Certificate of Limited Partnership of CubeSmart, L.P., dated September 14, 2012, incorporated by
reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K, filed on September 16, 2012.
Second Amended and Restated Agreement of Limited Partnership of U-Store-It, L.P. dated as of October 27, 2004,
incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on November 2, 2004.
60
3.8*
3.9*
4.1*
4.2*
4.3*
4.4*
4.5*
4.6*
10.1
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
Amendment No. 1 to Second Amended and Restated Agreement of Limited Partnership of CubeSmart, L.P. dated as of
November 2, 2011, incorporated by reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K, filed on
September 16, 2011.
Amendment No. 2 to Second Amended and Restated Agreement of Limited Partnership of CubeSmart, L.P. dated as of
November 2, 2011, incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed on
November 2, 2011.
Form of Common Share Certificate, incorporated by reference to Exhibit 4.1 to Amendment No. 3 to the Company’s
Registration Statement on Form S-11, filed on October 20, 2004, File No. 333-117848.
Form of Certificate for CubeSmart’s 7.75% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest,
incorporated by reference to Exhibit 4.1 to CubeSmart’s Form 8-A, filed on October 31, 2011.
Indenture, dated as of September 16, 2011, among CubeSmart, L.P., CubeSmart and U.S. Bank National Association,
incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-3, filed on September 16,
2011.
First Supplemental Indenture, dated as of June 26, 2012, among the Company, the Operating Partnership and U.S. Bank
National Association, incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K,
filed on June 26, 2012.
Form of $250 million aggregate principal amount of 4.80% senior note due July 15, 2022, incorporated herein by
reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed on June 26, 2012.
Form of CubeSmart Notation of Guarantee, incorporated herein by reference to Exhibit 4.3 to the Company’s Current
Report on Form 8-K, filed on June 26, 2012.
Settlement Agreement and Mutual Release, by and among U-Store-It Trust, U-Store-It, L.P., YSI Management LLC,
U-Store-It Mini Warehouse Co., U-Store-It Development, LLC, Dean Jernigan, Kathleen A. Weigand, Robert J.
Amsdell, Barry L. Amsdell, Todd C. Amsdell, Kyle V. Amsdell, Rising Tide Development LLC, and Amsdell and
Amsdell, dated August 6, 2007, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-
K, filed on August 7, 2007.
First Amendment to Lease, by and between U-Store-It, L.P. and Amsdell and Amsdell, dated August 6, 2007,
amending Lease dated March 29, 2005, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on
Form 8-K, filed on August 7, 2007.
First Amendment to Lease, by and between U-Store-It, L.P. and Amsdell and Amsdell, dated August 6, 2007,
amending Lease dated December 5, 2005, incorporated by reference to Exhibit 10.5 to the Company’s Current Report
on Form 8-K, filed on August 7, 2007.
First Amendment to Lease, by and between U-Store-It, L.P. and Amsdell and Amsdell, dated August 6, 2007,
amending Lease dated December 5, 2005, incorporated by reference to Exhibit 10.6 to the Company’s Current Report
on Form 8-K, filed on August 7, 2007.
First Amendment to Lease, by and between U-Store-It, L.P. and Amsdell and Amsdell, dated August 6, 2007,
amending Lease dated December 5, 2005, incorporated by reference to Exhibit 10.7 to the Company’s Current Report
on Form 8-K, filed on August 7, 2007.
First Amendment to Lease, by and between U-Store-It, L.P. and Amsdell and Amsdell, dated August 6, 2007,
amending Lease dated December 5, 2005, incorporated by reference to Exhibit 10.8 to the Company’s Current Report
on Form 8-K, filed on August 7, 2007.
Lease, dated March 29, 2005, by and between Amsdell and Amsdell and U-Store-It, L.P., incorporated by reference to
Exhibit 10.41 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, filed on
March 31, 2005.
61
10.8*
10.9*
10.10*†
10.11*†
10.12*†
10.13*†
10.14*†
10.15*†
10.16*†
10.17*†
Lease, dated June 29, 2005, by and between Amsdell and Amsdell and U-Store-It, L.P., incorporated by reference to
Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, filed on August 12,
2005.
Lease, dated June 29, 2005, by and between Amsdell and Amsdell and U-Store-It, L.P., incorporated by reference to
Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, filed on August 12,
2005.
Amended and Restated Executive Employment Agreement, dated June 29, 2010, by and between U-Store-It Trust and
Dean Jernigan, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on
July 2, 2010.
Amended and Restated Executive Employment Agreement, dated January 24, 2011, by and between U-Store-It Trust
and Christopher P. Marr, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K,
filed on January 27, 2011.
Amended and Restated Executive Employment Agreement, dated June 29, 2010, by and between U-Store-It Trust and
Timothy M. Martin, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on
July 2, 2010.
Indemnification Agreement, dated as of October 27, 2004, by and among U-Store-It Trust, U-Store-It, L.P. and David
J. LaRue (substantially identical agreements have been entered into with Dean Jernigan, Christopher P. Marr, Timothy
M. Martin, Jeffrey P. Foster, Daniel William M. Diefenderfer III, Piero Bussani, John W. Fain, B. Hurwitz, Marianne
M. Keler, and John F. Remondi), incorporated by reference to Exhibit 10.19 to the Company’s Current Report on
Form 8-K, filed on November 2, 2004.
Amended and Restated Noncompetition Agreement, dated as of June 29, 2010, by and between U-Store-It Trust and
Timothy M. Martin, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed on
July 2, 2010.
Amended and Restated Noncompetition Agreement, dated as of January 24, 2011, by and between U-Store-It Trust and
Christopher P. Marr, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on
January 27, 2011.
Amended and Restated Noncompetition Agreement, dated as of June 29, 2010, by and between U-Store-It Trust and
Dean Jernigan, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on
July 2, 2010.
Nonqualified Share Option Agreement, dated as of June 5, 2006, by and between U-Store-It Trust and Christopher P.
Marr, incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2006, filed on August 8, 2006.
10.18*†
Nonqualified Share Option Agreement, dated as of April 19, 2006, by and between U-Store-It Trust and Dean Jernigan,
incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed on April 24, 2006.
10.19*†
10.20*†
10.21*†
Form of Restricted Share Agreement for Non-Employee Trustees under the U-Store-It Trust 2007 Equity Incentive
Plan, incorporated by reference to Exhibit 10.83 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2007, filed on February 29, 2008.
Form of Nonqualified Share Option Agreement under the U-Store-It Trust 2004 Equity Incentive Plan, incorporated by
reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, filed
on May 10, 2007.
Form of Performance-Vested Restricted Share Agreement under the U-Store-It Trust 2004 Equity Incentive Plan,
incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2007, filed on May 10, 2007
62
10.22*†
Form of Restricted Share Agreement under the U-Store-It Trust 2004 Equity Incentive Plan, incorporated by reference
to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, filed on
May 10, 2007.
10.23*†
Form of Nonqualified Share Option Agreement under the U-Store-It Trust 2007 Equity Incentive Plan, incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on January 25, 2008.
10.24*†
Form of Restricted Share Agreement under the U-Store-It Trust 2007 Equity Incentive Plan, incorporated by reference
to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on January 25, 2008.
10.25*†
10.26*†
U-Store-It Trust Trustees Deferred Compensation Plan, amended and restated effective January 1, 2009, incorporated
by reference to Exhibit 10.78 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008,
filed on March 2, 2009.
U-Store-It Trust Executive Deferred Compensation Plan, amended and restated effective January 1, 2009, incorporated
by reference to Exhibit 10.79 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008,
filed on March 2, 2009.
10.27*†
U-Store-It Trust Deferred Trustees Plan, effective as of May 31, 2005, incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K, filed on June 6, 2005.
10.28*†
Amended and Restated U-Store It Trust 2007 Equity Incentive Plan, effective June 2, 2011, incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on June 4, 2011.
10.29*†
2004 Equity Incentive Plan of U-Store-It Trust, effective as of October 19, 2004, incorporated by reference to
Exhibit 10.6 to the Company’s Current Report on Form 8- K, filed on November 2, 2004.
10.31*
10.32*
Sales Agreement dated April 3, 2009, among the U-Store-It Trust, U-Store-It, L.P., and Cantor Fitzgerald & Co.,
incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K, filed on April 3, 2009.
Amendment No. 1 to Sales Agreement, dated January 26, 2011, by and among U-Store-It Trust, U-Store It, L.P. and
Cantor Fitzgerald & Co., incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K,
filed January 27, 2011.
10.33*†
Amended and Restated Employment Letter Agreement, dated April 4, 2011, by and between U-Store-It Trust and
Jeffrey P. Foster, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on
April 6, 2011.
10.34*
10.35*
10.36*
Term Loan Agreement dated as of June 20, 2011 by and among U-Store-It, L.P., as Borrower, U-Store-It Trust, and
Wells Fargo Securities, LLC and PNC Capital Markets LLC, as joint lead arrangers and joint bookrunners,
incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on June 23, 2011.
Amendment No. 2 to the Sales Agreement, dated September 16, 2011 among CubeSmart, CubeSmart, L.P. and Cantor
Fitzgerald & Co., incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on
September 16, 2011.
Agreement for Purchase & Sale, dated as of October 24, 2011, by and between CubeSmart, L.P. and 200 East 135th
Street LLC, 1880 Bartow Avenue LLC, 255 Exterior St LLC, 1376 Cromwell LLC, 175th Street DE LLC, Boston Rd
LLC, Bronx River LLC, Bruckner Blvd LLC, 1980 White Plains Road, 552 Van Buren LLC, 481 Grand LLC, 2047
Pitkin LLC, Sheffield Ave LLC, Cropsey Ave LLC, 9826 Jamaica Ave LLC, 179 Jamaica Avenue Realty LLC, 714
Markley St LLC, Yorktown Heights Storage, LLC, Marbledale Rd LLC, New Rochelle Storage Partners, L.L.C.,
Wilton Storage Partners L.L.C. and Shelton Storage LLC, incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K, filed on October 24, 2011.
10.37*
Registration Rights Agreement dated as of October 24, 2011 by and between CubeSmart and Wells Fargo Investment
Holdings, LLC, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on
October 24, 2011.
63
10.38*
10.40*
10.41*
Waiver of Ownership Limitation, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on
Form 8-K, filed on October 24, 2011.
Purchase Agreement for Series B Cumulative Redeemable Preferred Shares of Beneficial Interest, dated October 24,
2011, between CubeSmart and Wells Fargo Investment Holdings, LLC, incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K, filed on October 31, 2011.
Credit Agreement dated as of December 9, 2011 by and among CubeSmart, L.P., CubeSmart, Wells Fargo Securities,
LLC and Merrill Lynch, Pierce Fenner & Smith Incorporated, as Revolver and Tranche A joint lead arrangers and joint
bookrunners and Wells Fargo Securities, LLC, as Tranche B sole lead arranger and sole bookrunner, incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on December 14, 2011.
10.42†
Form of Restricted Share Agreement under the CubeSmart 2007 Equity Incentive Plan.
10.43†
Form of Non-Qualified Share Option Agreement under the CubeSmart 2007 Equity Incentive Plan.
10.44* †
10.45*
Form of 2012 Performance-Vested Restricted Share Unit Award Agreement under the CubeSmart 2007 Equity
Incentive Plan, incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed
on January 31, 2012.
First Amendment to Credit Agreement, dated as of April 5, 2012, by and among CubeSmart, L.P., CubeSmart, Wells
Fargo Bank, National Association and each of the lenders party to the credit agreement dated December 9, 2011,
incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed on May 7,
2012.
10.46* †
Performance Share Unit Award and Agreement, dated May 30, 2012, between CubeSmart and Dean Jernigan,
incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on June 1, 2012.
10.47†
Form of Restricted Share Unit Award Agreement (2-Year Vesting) under the CubeSmart 2007 Equity Incentive Plan.
10.48†
Form of Performance-Vested Restricted Share Unit Award Agreement under the CubeSmart 2007 Equity Incentive
Plan.
12.1
12.2
21.1
Statement regarding Computation of Ratios of CubeSmart
Statement regarding Computation of Ratios of CubeSmart, L.P.
List of Subsidiaries
23.1
Consent of KPMG LLP relating to financial statements of CubeSmart
23.2
Consent of KPMG LLP relating to financial statements of CubeSmart, L.P.
31.1
31.2
31.3
31.4
32.1
Certification of Chief Executive Officer of CubeSmart required by Rule 13a-14(a)/15d-14(a) under the Exchange Act,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer of CubeSmart required by Rule 13a-14(a)/15d-14(a) under the Exchange Act,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer of CubeSmart, L.P. required by Rule 13a-14(a)/15d-14(a) under the Exchange
Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer of CubeSmart, L.P. required by Rule 13a-14(a)/15d-14(a) under the Exchange
Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer and Chief Financial Officer of CubeSmart pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
64
32.2
Certification of Chief Executive Officer and Chief Financial Officer of CubeSmart, L.P. pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1
Material Tax Considerations.
101
The following CubeSmart and CubeSmart, L.P. financial information for the year ended December 31, 2012, formatted
in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated
Statements of Operations, (iii) the Consolidated Statement of Equity, (iv) the Consolidated Statements of Cash Flows,
and (v) Notes to Consolidated Financial Statements, detailed tagged and filed herewith.
*
Incorporated herein by reference as above indicated.
†
Denotes a management contract or compensatory plan, contract or arrangement.
65
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
CUBESMART
By:
/s/ Timothy M. Martin
Timothy M. Martin
Chief Financial Officer
Date: February 28, 2013
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ William M. Diefenderfer III
William M. Diefenderfer III
Chairman of the Board of Trustees
February 28, 2013
/s/ Dean Jernigan
Dean Jernigan
/s/ Timothy M. Martin
Timothy M. Martin
/s/ Piero Bussani
Piero Bussani
/s/ Marianne M. Keler
Marianne M. Keler
/s/ David J. LaRue
David J. LaRue
/s/ John F. Remondi
John F. Remondi
/s/ Jeffrey F. Rogatz
Jeffrey F. Rogatz
/s/ John W. Fain
John W. Fain
Chief Executive Officer and Trustee
(Principal Executive Officer)
February 28, 2013
Chief Financial Officer
(Principal Financial and Accounting Officer)
February 28, 2013
February 28, 2013
February 28, 2013
February 28, 2013
February 28, 2013
February 28, 2013
February 28, 2013
Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
66
FINANCIAL STATEMENTS
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements of CUBESMART and CUBESMART L.P. (The “Company”)
Management’s Report on CubeSmart Internal Control Over Financial Reporting ......................................................................
Reports of Independent Registered Public Accounting Firm .......................................................................................................
CubeSmart and Subsidiaries Consolidated Balance Sheets as of December 31, 2012 and 2011 .................................................
CubeSmart and Subsidiaries Consolidated Statements of Operations for the years ended December 31, 2012, 2011,
and 2010 ......................................................................................................................................................................................
CubeSmart and Subsidiaries Consolidated Statements of Comprehensive Loss for the years ended December 31, 2012,
2011, and 2010 .............................................................................................................................................................................
Page No.
F-2
F-3
F-7
F-8
F-9
CubeSmart and Subsidiaries Consolidated Statements of Equity for the years ended December 31, 2012, 2011, and 2010 ......
F-10
CubeSmart and Subsidiaries Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011,
and 2010 .......................................................................................................................................................................................
F-11
CubeSmart L.P. and Subsidiaries Consolidated Balance Sheets as of December 31, 2012 and 2011 .........................................
F-12
CubeSmart L.P. and Subsidiaries Consolidated Statements of Operations for the years ended December 31, 2012, 2011,
and 2010 .......................................................................................................................................................................................
CubeSmart L.P. and Subsidiaries Consolidated Statements of Comprehensive Loss for the years ended December 31,
2012, 2011, and 2010 ...................................................................................................................................................................
CubeSmart L.P. and Subsidiaries Consolidated Statements of Capital for the years ended December 31, 2012, 2011,
and 2010 .......................................................................................................................................................................................
CubeSmart L.P. and Subsidiaries Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011,
and 2010 .......................................................................................................................................................................................
F-13
F-14
F-15
F-16
Notes to Consolidated Financial Statements ................................................................................................................................
F-17
F-1
MANAGEMENT’S REPORT ON CUBESMART INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of CubeSmart and CubeSmart L.P. (collectively, the “Company”) is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under
Section 404 of the Sarbanes-Oxley Act of 2002, the Company’s management is required to assess the effectiveness of the Company’s
internal control over financial reporting as of the end of each fiscal year, and report on the basis of that assessment whether the
Company’s internal control over financial reporting is effective.
The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally
accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and the
disposition of the assets of the Company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with U.S. generally accepted accounting principles, and that the receipts and expenditures of the Company are
being made only in accordance with the authorization of the Company’s management and its Board of Trustees; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
Company’s assets that could have a material effect on the financial statements.
There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and the
circumvention or overriding of controls. Accordingly, even an effective internal control system can provide only reasonable assurance
with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of an internal control
system may vary over time.
Under the supervision, and with the participation, of the Company’s management, including the principal executive officer and
principal financial officer, we conducted a review, evaluation and assessment of the effectiveness of our internal control over financial
reporting as of December 31, 2012, based upon the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
criteria. In performing its assessment of the effectiveness of internal control over financial reporting, management has concluded that,
as of December 31, 2012, the Company’s internal control over financial reporting was effective based on the COSO framework.
The effectiveness of our internal control over financial reporting as of December 31, 2012, has been audited by KPMG LLP, an
independent registered public accounting firm, as stated in their report that appears herein.
February 28, 2013
F-2
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
CubeSmart:
We have audited the accompanying consolidated balance sheets of CubeSmart as of December 31, 2012 and 2011, and the related
consolidated statements of operations, comprehensive loss, equity, and cash flows for each of the years in the three-year period ended
December 31, 2012. In connection with our audits of the consolidated financial statements, we have also audited the financial
statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are
the responsibility of CubeSmart’s management. Our responsibility is to express an opinion on these consolidated financial statements
and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
CubeSmart as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles. Also in our opinion,
the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
CubeSmart’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report
dated February 28, 2013, expressed an unqualified opinion on the effectiveness of CubeSmart’s internal control over financial
reporting.
/s/ KPMG LLP
Philadelphia, Pennsylvania
February 28, 2013
F-3
Report of Independent Registered Public Accounting Firm
The Partners of
CubeSmart, L.P.:
We have audited the accompanying consolidated balance sheets of CubeSmart, L.P. as of December 31, 2012 and 2011, and the
related consolidated statements of operations, comprehensive loss, capital, and cash flows for each of the years in the three-year period
ended December 31, 2012. In connection with our audits of the consolidated financial statements, we have also audited the financial
statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are
the responsibility of CubeSmart, L.P.’s management. Our responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
CubeSmart, L.P. as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles. Also in our opinion,
the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
CubeSmart, L.P.’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report
dated February 28, 2013, expressed an unqualified opinion on the effectiveness of CubeSmart, L.P.’s internal control over financial
reporting.
/s/ KPMG LLP
Philadelphia, Pennsylvania
February 28, 2013
F-4
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
CubeSmart:
We have audited CubeSmart’s internal control over financial reporting as of December 31, 2012, based on criteria established in
Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). CubeSmart’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on CubeSmart Internal
Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, CubeSmart maintained, in all material respects, effective internal control over financial reporting as of December 31,
2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of CubeSmart as of December 31, 2012 and 2011, and the related consolidated statements of operations,
comprehensive loss, equity, and cash flows for each of the years in the three-year period ended December 31, 2012, and our report
dated February 28, 2013 expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG LLP
Philadelphia, Pennsylvania
February 28, 2013
F-5
Report of Independent Registered Public Accounting Firm
The Partners of
CubeSmart, L.P.:
We have audited CubeSmart, L.P’s internal control over financial reporting as of December 31, 2012, based on criteria established in
Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). CubeSmart, L.P.’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on CubeSmart Internal
Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, CubeSmart, L.P. maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of CubeSmart, L.P. as of December 31, 2012 and 2011, and the related consolidated statements of
operations, comprehensive loss, capital, and cash flows for each of the years in the three-year period ended December 31, 2012, and
our report dated February 28, 2013 expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG LLP
Philadelphia, Pennsylvania
February 28, 2013
F-6
CUBESMART AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
ASSETS
Storage facilities ......................................................................................................................
Less: Accumulated depreciation ..............................................................................................
Storage facilities, net ................................................................................................................
Cash and cash equivalents .......................................................................................................
Restricted cash .........................................................................................................................
Loan procurement costs, net of amortization ...........................................................................
Investment in real estate ventures, at equity ............................................................................
Other assets, net .......................................................................................................................
Total assets .......................................................................................................................
LIABILITIES AND EQUITY
Unsecured senior notes ............................................................................................................
Revolving credit facility ..........................................................................................................
Unsecured term loan ................................................................................................................
Mortgage loans and notes payable ...........................................................................................
Accounts payable, accrued expenses and other liabilities ........................................................
Distributions payable ...............................................................................................................
Deferred revenue ......................................................................................................................
Security deposits ......................................................................................................................
Total liabilities .................................................................................................................
$
$
$
December 31,
2012
2011
$
$
$
2,443,022
(353,315)
2,089,707
4,495
6,070
8,253
—
41,794
2,150,319
250,000
45,000
500,000
228,759
60,708
16,419
11,090
444
1,112,420
2,107,469
(318,749)
1,788,720
9,069
11,291
8,073
15,181
43,645
1,875,979
—
—
400,000
358,441
51,025
11,401
9,568
490
830,925
Noncontrolling interests in the Operating Partnership .............................................................
47,990
49,732
Commitments and contingencies .............................................................................................
Equity .......................................................................................................................................
7.75% Series A Preferred shares $.01 par value, 3,220,000 shares authorized, 3,100,000
shares issued and outstanding at December 31, 2012 and December 31, 2011,
respectively ......................................................................................................................
Common shares $.01 par value, 200,000,000 shares authorized, 131,794,547 and
122,058,919 shares issued and outstanding at December 31, 2012 and December 31,
2011, respectively ............................................................................................................
Additional paid in capital ...................................................................................................
Accumulated other comprehensive loss ...............................................................................
Accumulated deficit .............................................................................................................
Total CubeSmart shareholders’ equity .............................................................................
Noncontrolling interest in subsidiaries .................................................................................
Total equity ..............................................................................................................................
Total liabilities and equity .......................................................................................................
31
31
1,318
1,418,463
(19,796)
(410,225)
989,791
118
989,909
2,150,319
$
1,221
1,309,505
(12,831)
(342,013)
955,913
39,409
995,322
1,875,979
$
See accompanying notes to the consolidated financial statements.
F-7
CUBESMART AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
REVENUES
Rental income .......................................................................................
Other property related income ..............................................................
Property management fee income .........................................................
Total revenues ...................................................................................
$
OPERATING EXPENSES
Property operating expenses .................................................................
Depreciation and amortization ..............................................................
General and administrative ...................................................................
Total operating expenses ...................................................................
OPERATING INCOME
OTHER INCOME (EXPENSE)
Interest:
Interest expense on loans ..................................................................
Loan procurement amortization expense ..........................................
Loan procurement amortization expense - early repayment of
debt ...............................................................................................
Acquisition related costs .......................................................................
Equity in losses of real estate ventures .................................................
Gain from remeasurement of investment in real estate venture ............
Other .....................................................................................................
Total other expense ...........................................................................
2012
For the year ended December 31,
2011
2010
$
250,959
27,776
4,341
283,076
110,821
113,874
26,131
250,826
32,250
(40,715)
(3,279)
—
(3,086)
(745)
7,023
256
(40,546)
$
202,762
20,715
3,768
227,245
94,630
65,955
24,693
185,278
41,967
(33,199)
(5,028)
(8,167)
(3,823)
(281)
—
(83)
(50,581)
179,748
17,114
2,829
199,691
85,779
58,876
25,406
170,061
29,630
(37,794)
(6,463)
—
(759)
—
—
386
(44,630)
LOSS FROM CONTINUING OPERATIONS
(8,296)
(8,614)
(15,000)
DISCONTINUED OPERATIONS
Income from discontinued operations ...................................................
Gain on disposition of discontinued operations ....................................
Total discontinued operations ...........................................................
NET INCOME (LOSS)
NET LOSS (INCOME) ATTRIBUTABLE TO
NONCONTROLLING INTERESTS
Noncontrolling interests in the Operating Partnership ..........................
Noncontrolling interest in subsidiaries ..................................................
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY
Distribution to Preferred Shares ............................................................
NET LOSS ATTRIBUTABLE TO THE COMPANY’S COMMON
SHAREHOLDERS
Basic and diluted loss per share from continuing operations attributable
to common shareholders .......................................................................
Basic and diluted earnings per share from discontinued operations
attributable to common shareholders ....................................................
Basic and diluted loss per share attributable to common shareholders .....
Weighted-average basic and diluted shares outstanding ...........................
AMOUNTS ATTRIBUTABLE TO THE COMPANY’S COMMON
SHAREHOLDERS:
Loss from continuing operations ...............................................................
Total discontinued operations ...................................................................
Net loss .....................................................................................................
$
$
$
$
$
$
2,113
9,811
11,924
3,628
107
(1,918)
1,817
(6,008)
7,158
3,903
11,061
2,447
(35)
(2,810)
(398)
(1,218)
7,155
1,826
8,981
(6,019)
381
(1,755)
(7,393)
—
(4,191) $
(1,616) $
(7,393)
(0.13) $
(0.12) $
0.10
$
(0.03) $
0.10
$
(0.02) $
(0.17)
0.09
(0.08)
124,548
102,976
93,998
(15,829) $
11,638
(4,191) $
(12,168) $
10,552
(1,616) $
(15,907)
8,514
(7,393)
See accompanying notes to the consolidated financial statements.
F-8
CUBESMART AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
NET INCOME (LOSS) .............................................................................
Other comprehensive (loss) gain:
Unrealized loss on interest rate swap ................................................
Unrealized gain (loss) on foreign currency translation .....................
OTHER COMPREHENSIVE LOSS ........................................................
COMPREHENSIVE LOSS ......................................................................
Comprehensive income attributable to noncontrolling interests in the
Operating Partnership .......................................................................
Comprehensive loss attributable to noncontrolling interests in
2012
Year Ended December 31,
2011
2010
$
3,628
$
2,447
$
(6,019)
(7,466)
172
(7,294)
(3,666)
445
(12,394)
151
(12,243)
(9,796)
503
—
(268)
(268)
(6,287)
394
(1,747)
(7,640)
subsidiaries ........................................................................................
COMPREHENSIVE LOSS ATTRIBUTABLE TO THE COMPANY ...
$
(1,927)
(5,148) $
(2,815)
(12,108) $
See accompanying notes to the consolidated financial statements.
F-9
CUBESMART AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands)
Balance at December 31, 2009 ............
Contributions from noncontrolling
interests in subsidiaries ....................
Issuance of common shares, net .............
Issuance of restricted shares ...................
Conversion from units to shares ............
Exercise of stock options .......................
Amortization of restricted shares ...........
Share compensation expense .................
Adjustment for noncontrolling interest
in operating partnership ...................
Net (loss) income ...................................
Other comprehensive loss: .....................
Unrealized loss on foreign currency
translation .................................
Distributions ...........................................
Balance at December 31, 2010 ............
Contributions from noncontrolling
interests in subsidiaries ....................
Issuance of common shares, net .............
Issuance of preferred shares, net ............
Issuance of restricted shares ...................
Conversion from units to shares ............
Exercise of stock options .......................
Amortization of restricted shares ...........
Share compensation expense .................
Adjustment for noncontrolling interest
in operating partnership ...................
Net (loss) income ...................................
Other comprehensive (loss) gain: ..........
Unrealized loss on interest rate
swap ..........................................
Unrealized gain on foreign currency
translation .................................
Preferred share distributions ..................
Common share distributions ..................
Balance at December 31, 2011 ............
Contributions from noncontrolling
interests in subsidiaries ....................
Issuance of common shares, net .............
Issuance of restricted shares ...................
Conversion from units to shares ............
Exercise of stock options .......................
Amortization of restricted shares ...........
Share compensation expense .................
Adjustment for noncontrolling interest
in operating partnership ...................
Acquisition of noncontrolling interest ...
Net income (loss) ...................................
Other comprehensive (loss) gain: ..........
Unrealized loss on interest rate
swap ..........................................
Unrealized gain on foreign currency
translation .................................
Preferred share distributions ..................
Common share distributions ..................
Balance at December 31, 2012 ............
Common Shares
Number
Amount
Preferred Shares
Amount
Number
Additional
Paid in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Shareholders’
Equity
Noncontrolling
Interest in
Subsidiaries
Total
Equity
Noncontrolling
Interests in the
Operating
Partnership
92,655 $
927
— $
— $
974,926 $
(874) $
(279,670) $
695,309 $
44,021 $
739,330 $
45,394
5,610
203
73
56
56
2
1
47,517
674
194
1,759
1,882
47,573
2
675
194
1,759
1,882
(1,510 )
(7,393 )
15
1,755
15
47,573
2
675
194
1,759
1,882
(1,510)
(5,638)
(1,510)
(7,393)
98,597 $
986
— $
— $ 1,026,952 $
(1,121) $
(247)
(14,028)
(302,601) $
(247 )
(14,028 )
724,216 $
(8)
(4,591)
41,192 $
(255)
(18,619)
765,408 $
23,140
231
235
63
24
3
1
3,100
31
203,788
74,817
623
121
1,677
1,527
122,059 $
1,221
3,100 $
31 $ 1,309,505 $
(12,831) $
(11,849)
139
7,900
246
1,380
210
79
2
14
2
102,000
19,233
1,627
3,352
1,198
(18,452)
(7,124)
159
131,795 $
1,318
3,100 $
31 $ 1,418,463 $
(19,796) $
204,019
74,848
3
624
121
1,677
1,527
(7,082 )
(398 )
(11,849 )
139
(1,218 )
(30,714 )
955,913 $
102,079
2
19,247
1,629
3,352
1,198
(19,520 )
(18,452 )
1,817
(7,124 )
159
(6,008 )
(44,501 )
989,791 $
1
1
204,019
74,848
3
624
121
1,677
1,527
2,810
(7,082)
2,412
(11,849)
144
(1,218)
(35,313)
995,322 $
5
(4,599)
39,409 $
102,079
2
19,247
1,629
3,352
1,198
(19,520)
(56,984)
3,735
(38,532)
1,918
(7,124)
168
(6,008)
(47,187)
989,909 $
9
(2,686)
118 $
(7,082)
(398)
(1,218)
(30,714)
(342,013) $
(19,520)
1,817
(6,008)
(44,501)
(410,225) $
See accompanying notes to the consolidated financial statements.
(675)
1,510
(381)
(13)
(690)
45,145
(624)
7,082
35
(545)
7
(1,368)
49,732
(19,247)
19,520
(132)
(107)
(342)
4
(1,438)
47,990
F-10
CUBESMART AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Year Ended December 31,
2011
2010
2012
Operating Activities
Net income (loss) .....................................................................................................
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization .............................................................................
Gain on disposition of discontinued operations ...................................................
Gain from remeasurement of investment in real estate venture ...........................
Equity compensation expense ..............................................................................
Accretion of fair market value adjustment of debt ...............................................
Loan procurement amortization expense - early repayment of debt ....................
Equity in losses of real estate venture ..................................................................
Changes in other operating accounts:
Other assets .........................................................................................................
Restricted cash .....................................................................................................
Accounts payable and accrued expenses .............................................................
Other liabilities ....................................................................................................
Net cash provided by operating activities .......................................................
Investing Activities ......................................................................................................
Acquisitions, additions and improvements to storage facilities ................................
Cash paid for remaining interest in real estate ventures ...........................................
Investment in real estate venture, at equity ..............................................................
Cash distributed from real estate venture .................................................................
Proceeds from sales of properties, net ......................................................................
Proceeds from notes receivable ................................................................................
Decrease in restricted cash .......................................................................................
Net cash used in by investing activities ...............................................................
Financing Activities
Proceeds from:
Unsecured senior notes ........................................................................................
Revolving credit facility ......................................................................................
Mortgage loans and notes payable .......................................................................
Unsecured term loans ..........................................................................................
Principal payments on:
Revolving credit facility ......................................................................................
Unsecured term loans ..........................................................................................
Mortgage loans and notes payable .......................................................................
Settlement of hedge transactions ..............................................................................
Proceeds from issuance of common shares, net .......................................................
Proceeds from issuance of preferred shares, net .......................................................
Exercise of stock options ..........................................................................................
Contributions from noncontrolling interests in subsidiaries .....................................
Acquisition of noncontrolling interest ......................................................................
Distributions paid to common shareholders .............................................................
Distributions paid to preferred shareholders .............................................................
Distributions paid to noncontrolling interests in Operating Partnership ...................
Distributions paid to noncontrolling interest in subsidiaries.....................................
Loan procurement costs ...........................................................................................
Net cash provided by (used in) financing activities .............................................
(Decrease) increase in cash and cash equivalents ................................................
Cash and cash equivalents at beginning of year ............................................................
Cash and cash equivalents at end of year ......................................................................
Supplemental Cash Flow and Noncash Information
Cash paid for interest, net of interest capitalized ......................................................
Supplemental disclosure of noncash activities:
Acquisition related contingent consideration .......................................................
Consolidation of real estate venture .....................................................................
Derivative valuation adjustment ..........................................................................
Foreign currency translation adjustment ..............................................................
Mortgage loan assumption - acquisition of storage facility .................................
$
3,628
$
2,447
$
118,573
(9,811)
(7,023)
4,550
(707)
—
745
(2,125)
3,545
6,899
154
118,428
(247,413)
(81,158)
—
909
52,630
—
3,096
(271,936)
249,638
403,000
—
100,000
(358,000)
—
(236,340)
(195)
102,079
—
1,629
—
(61,113)
(39,755)
(5,724)
(1,454)
(2,686)
(2,145)
148,934
(4,574)
9,069
4,495
33,578
—
13,527
(7,271)
172
107,011
$
$
$
$
$
$
$
$
$
$
73,702
(3,903)
—
3,204
(89)
8,167
281
(585)
(853)
2,634
(678)
84,327
(471,188)
—
(15,462)
—
44,460
—
90
(442,100)
—
256,700
3,537
400,000
(299,700)
(200,000)
(39,321)
—
204,019
74,848
121
1
—
(27,849)
—
(1,322)
(4,599)
(5,484)
360,951
3,178
5,891
9,069
33,265
—
—
(12,394)
151
21,827
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
See accompanying notes to the consolidated financial statements.
F-11
(6,019)
70,850
(1,826)
—
3,641
(255)
—
—
(427)
3,889
1,437
227
71,517
(104,441)
—
—
—
37,304
20,112
2,242
(44,783)
—
95,000
—
—
(52,000)
—
(196,205)
—
47,573
—
194
15
—
(9,407)
—
(482)
(4,591)
(3,708)
(123,611)
(96,877)
102,768
5,891
38,346
1,777
—
—
(268)
—
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
Storage facilities ......................................................................................................................
Less: Accumulated depreciation ..............................................................................................
Storage facilities, net ................................................................................................................
Cash and cash equivalents .......................................................................................................
Restricted cash .........................................................................................................................
Loan procurement costs, net of amortization ...........................................................................
Investment in real estate ventures, at equity ............................................................................
Other assets, net .......................................................................................................................
Total assets .......................................................................................................................
LIABILITIES AND CAPITAL
Unsecured senior notes ............................................................................................................
Revolving credit facility ..........................................................................................................
Unsecured term loan ................................................................................................................
Mortgage loans and notes payable ...........................................................................................
Accounts payable, accrued expenses and other liabilities ........................................................
Distributions payable ...............................................................................................................
Deferred revenue ......................................................................................................................
Security deposits ......................................................................................................................
Total liabilities .................................................................................................................
$
$
$
December 31,
2012
2011
$
$
$
2,443,022
(353,315)
2,089,707
4,495
6,070
8,253
—
41,794
2,150,319
250,000
45,000
500,000
228,759
60,708
16,419
11,090
444
1,112,420
2,107,469
(318,749)
1,788,720
9,069
11,291
8,073
15,181
43,645
1,875,979
—
—
400,000
358,441
51,025
11,401
9,568
490
830,925
Limited Partnership interest of third parties .............................................................................
47,990
49,732
Commitments and contingencies
Capital
Operating Partner .................................................................................................................
Accumulated other comprehensive loss ...............................................................................
Total CubeSmart L.P. capital ...........................................................................................
Noncontrolling interests in subsidiaries ...............................................................................
Total capital .............................................................................................................................
Total liabilities and capital .......................................................................................................
1,009,587
(19,796)
989,791
118
989,909
2,150,319
$
968,744
(12,831)
955,913
39,409
995,322
1,875,979
$
See accompanying notes to the consolidated financial statements.
F-12
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per common unit data)
2012
For the year ended December 31,
2011
2010
REVENUES
Rental income .......................................................................................
Other property related income ..............................................................
Property management fee income .........................................................
Total revenues ...................................................................................
$
OPERATING EXPENSES
Property operating expenses .................................................................
Depreciation and amortization ..............................................................
General and administrative ...................................................................
Total operating expenses ...................................................................
OPERATING INCOME
OTHER INCOME (EXPENSE)
Interest:
Interest expense on loans ..................................................................
Loan procurement amortization expense ..........................................
Loan procurement amortization expense - early repayment of
debt ...............................................................................................
Acquisition related costs .......................................................................
Equity in losses of real estate ventures .................................................
Gain from remeasurement of investment in real estate venture ............
Other .....................................................................................................
Total other expense ...........................................................................
LOSS FROM CONTINUING OPERATIONS ....................................
DISCONTINUED OPERATIONS
Income from discontinued operations ...................................................
Gain on disposition of discontinued operations ....................................
Total discontinued operations ...........................................................
NET INCOME (LOSS)
NET INCOME ATTRIBUTABLE TO NONCONTROLLING
INTERESTS
Noncontrolling interest in subsidiaries ..................................................
NET INCOME (LOSS) ATTRIBUTABLE TO CUBESMART L.P.
Limited Partnership interest of third parties ..........................................
NET INCOME (LOSS) ATTRIBUTABLE TO OPERATING
PARTNER ...........................................................................................
Distribution to Preferred Units ..............................................................
NET LOSS ATTRIBUTABLE TO COMMON UNITHOLDERS .....
Basic and diluted loss per unit from continuing operations attributable to
common unitholders ..............................................................................
Basic and diluted earnings per unit from discontinued operations
attributable to common unitholders ......................................................
Basic and diluted loss per unit attributable to common unitholders .........
Weighted-average basic and diluted units outstanding .............................
AMOUNTS ATTRIBUTABLE TO COMMON UNITHOLDERS:
Loss from continuing operations ...............................................................
Total discontinued operations ...................................................................
Net loss .....................................................................................................
$
$
$
$
$
$
$
250,959
27,776
4,341
283,076
110,821
113,874
26,131
250,826
32,250
(40,715)
(3,279)
—
(3,086)
(745)
7,023
256
(40,546)
(8,296)
2,113
9,811
11,924
3,628
(1,918)
1,710
107
$
202,762
20,715
3,768
227,245
94,630
65,955
24,693
185,278
41,967
(33,199)
(5,028)
(8,167)
(3,823)
(281)
—
(83)
(50,581)
(8,614)
7,158
3,903
11,061
2,447
(2,810)
(363)
(35)
1,817
(6,008)
(4,191) $
(398)
(1,218)
(1,616) $
(0.13) $
(0.12) $
0.10
$
(0.03) $
0.10
$
(0.02) $
179,748
17,114
2,829
199,691
85,779
58,876
25,406
170,061
29,630
(37,794)
(6,463)
—
(759)
—
—
386
(44,630)
(15,000)
7,155
1,826
8,981
(6,019)
(1,755)
(7,774)
381
(7,393)
—
(7,393)
(0.17)
0.09
(0.08)
124,548
102,976
93,998
(15,829) $
11,638
(4,191) $
(12,168) $
10,552
(1,616) $
(15,907)
8,514
(7,393)
See accompanying notes to the consolidated financial statements.
F-13
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
NET INCOME (LOSS) .............................................................................
Other comprehensive (loss) gain:
Unrealized loss on interest rate swap ................................................
Unrealized gain (loss) on foreign currency translation .....................
OTHER COMPREHENSIVE LOSS ........................................................
COMPREHENSIVE LOSS ......................................................................
Comprehensive income attributable to noncontrolling interests in the
Operating Partnership .......................................................................
Comprehensive loss attributable to noncontrolling interests in
2012
Year Ended December 31,
2011
2010
$
3,628
$
2,447
$
(6,019)
(7,466)
172
(7,294)
(3,666)
445
(12,394)
151
(12,243)
(9,796)
503
—
(268)
(268)
(6,287)
394
(1,747)
(7,640)
subsidiaries ........................................................................................
COMPREHENSIVE LOSS ATTRIBUTABLE TO THE COMPANY ...
$
(1,927)
(5,148) $
(2,815)
(12,108) $
See accompanying notes to the consolidated financial statements.
F-14
Balance at December 31, 2009 .....................
Contributions from noncontrolling interests
in subsidiaries ...........................................
Issuance of common OP units, net ..................
Issuance of restricted OP units ........................
Exercise of OP unit options ............................
Conversion from units to shares .....................
Amortization of restricted OP units ................
OP unit compensation expense .......................
Adjustment for Limited Partnership ...............
interest of third parties ..............................
Net (loss) income ............................................
Other comprehensive loss: ..............................
Unrealized loss on foreign currency
translation ...........................................
Distributions ....................................................
Balance at December 31, 2010 .....................
Contributions from noncontrolling interests
in subsidiaries ...........................................
Issuance of common OP units, net ..................
Issuance of preferred OP units, net .................
Issuance of restricted OP units ........................
Exercise of OP unit options ............................
Conversion from units to shares .....................
Amortization of restricted OP units ................
OP unit compensation expense .......................
Net (loss) income ............................................
Adjustment for Limited Partnership ................
interest of third parties ..............................
Other comprehensive (loss) gain: ...................
Unrealized loss on interest rate swap ........
Unrealized gain on foreign currency
translation ...........................................
Preferred unit distributions .............................
Common unit distributions .............................
Balance at December 31, 2011 .....................
Contributions from noncontrolling interests
in subsidiaries
Issuance of common OP units, net ..................
Issuance of restricted OP units ........................
Exercise of OP unit options ............................
Conversion from units to shares .....................
Amortization of restricted OP units ................
OP unit compensation expense .......................
Net income (loss) ............................................
Adjustment for Limited Partnership ...............
interest of third parties ..............................
Acquisition of noncontrolling interest ............
Other comprehensive (loss) gain: ...................
Unrealized loss on interest rate swap ........
Unrealized gain on foreign currency
translation ...........................................
Preferred unit distributions .............................
Common unit distributions .............................
Balance at December 31, 2012 .....................
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITAL
(in thousands)
Number of
Common OP
Units
Number of
Preferred OP
Units
Oustanding
Oustanding
Operating
Partner
Accumulated Other
Comprehensive
(Loss) Income
Total
Cubesmart L.P.
Capital
Noncontrolling
Interest in
Subsidiaries
Total
Capital
Operating
Partnership interest
of third parties
92,655
— $
696,183 $
(874) $
695,309 $
44,021 $
739,330
$
45,394
5,610
203
56
73
47,573
2
194
675
1,759
1,882
(1,510)
(7,393)
47,573
2
194
675
1,759
1,882
(1,510)
(7,393)
15
1,755
15
47,573
2
194
675
1,759
1,882
(1,510)
(5,638)
98,597
— $
(14,028)
725,337 $
(247)
(1,121) $
(247)
(14,028)
724,216 $
(8)
(4,591)
41,192 $
(255)
(18,619)
765,408
$
23,140
235
24
63
3,100
122,059
3,100 $
7,900
246
210
1,380
204,019
74,848
3
121
624
1,677
1,527
(398)
(7,082)
(1,218)
(30,714)
968,744 $
102,079
2
1,629
19,247
3,352
1,198
1,817
(19,520)
(18,452)
1
2,810
204,019
74,848
3
121
624
1,677
1,527
(398)
(7,082)
(11,849)
(11,849)
139
(12,831) $
139
(1,218)
(30,714)
955,913 $
5
(4,599)
39,409 $
102,079
2
1,629
19,247
3,352
1,198
1,817
(19,520)
(18,452)
1,918
(38,532)
9
(2,686)
118 $
1
204,019
74,848
3
121
624
1,677
1,527
2,412
(7,082)
(11,849)
144
(1,218)
(35,313)
995,322
102,079
2
1,629
19,247
3,352
1,198
3,735
(19,520)
(56,984)
(7,124)
168
(6,008)
(47,187)
989,909
$
$
131,795
3,100 $
(6,008)
(44,501)
1,009,587 $
(7,124)
(7,124)
159
(19,796) $
159
(6,008)
(44,501)
989,791 $
See accompanying notes to the consolidated financial statements.
F-15
(675)
1,510
(381)
(13)
(690)
45,145
(624)
35
7,082
(545)
7
(1,368)
49,732
(19,247)
(107)
19,520
(132)
(342)
4
(1,438)
47,990
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Year Ended December 31,
2011
2010
2012
Operating Activities
Net income (loss) .....................................................................................................
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization .............................................................................
Gain on disposition of discontinued operations ...................................................
Gain from remeasurement of investment in real estate venture ...........................
Equity compensation expense ..............................................................................
Accretion of fair market value adjustment of debt ...............................................
Loan procurement amortization expense - early repayment of debt ....................
Equity in losses of real estate venture ..................................................................
Changes in other operating accounts:
Other assets .........................................................................................................
Restricted cash .....................................................................................................
Accounts payable and accrued expenses .............................................................
Other liabilities ....................................................................................................
Net cash provided by operating activities .......................................................
Investing Activities ......................................................................................................
Acquisitions, additions and improvements to storage facilities ................................
Cash paid for remaining interest in real estate ventures ...........................................
Investment in real estate venture, at equity ..............................................................
Distributions from real estate venture ......................................................................
Proceeds from sales of properties, net ......................................................................
Proceeds from notes receivable ................................................................................
Decrease in restricted cash .......................................................................................
Net cash used in investing activities ....................................................................
Financing Activities ....................................................................................................
Proceeds from:
Unsecured senior notes ........................................................................................
Revolving credit facility ......................................................................................
Mortgage loans and notes payable .......................................................................
Unsecured term loans ..........................................................................................
Principal payments on:
Revolving credit facility ......................................................................................
Unsecured term loans ..........................................................................................
Mortgage loans and notes payable .......................................................................
Settlement of hedge transactions ..............................................................................
Proceeds from issuance of common OP units, net ....................................................
Proceeds from issuance of preferred OP units, net ...................................................
Exercise of unit options ............................................................................................
Contributions from noncontrolling interests in subsidiaries .....................................
Acquisition of noncontrolling interest ......................................................................
Distributions paid to common unitholders ...............................................................
Distributions paid to preferred unitholders ...............................................................
Distributions paid to noncontrolling interest in subsidiaries.....................................
Loan procurement costs ...........................................................................................
Net cash provided by (used in) financing activities .............................................
(Decrease) increase in cash and cash equivalents ................................................
Cash and cash equivalents at beginning of year ............................................................
Cash and cash equivalents at end of year ......................................................................
Supplemental Cash Flow and Noncash Information
Cash paid for interest, net of interest capitalized ......................................................
Supplemental disclosure of noncash activities:
Acquisition related contingent consideration .......................................................
Consolidation of real estate venture .....................................................................
Derivative valuation adjustment ..........................................................................
Foreign currency translation adjustment ..............................................................
Mortgage loan assumption - acquisition of storage facility .................................
$
3,628
$
2,447
$
118,573
(9,811)
(7,023)
4,550
(707)
—
745
(2,125)
3,545
6,899
154
118,428
(247,413)
(81,158)
—
909
52,630
—
3,096
(271,936)
249,638
403,000
—
100,000
(358,000)
—
(236,340)
(195)
102,079
—
1,629
—
(61,113)
(41,209)
(5,724)
(2,686)
(2,145)
148,934
(4,574)
9,069
4,495
33,578
—
13,527
(7,271)
172
107,011
$
$
$
$
$
$
$
$
$
$
73,702
(3,903)
—
3,204
(89)
8,167
281
(585)
(853)
2,634
(678)
84,327
(471,188)
—
(15,462)
—
44,460
—
90
(442,100)
—
256,700
3,537
400,000
(299,700)
(200,000)
(39,321)
—
204,019
74,848
121
1
—
(29,171)
—
(4,599)
(5,484)
360,951
3,178
5,891
9,069
33,265
—
—
(12,394)
151
21,827
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
See accompanying notes to the consolidated financial statements.
F-16
(6,019)
70,850
(1,826)
—
3,641
(255)
—
—
(427)
3,889
1,437
227
71,517
(104,441)
—
—
—
37,304
20,112
2,242
(44,783)
—
95,000
—
—
(52,000)
—
(196,205)
—
47,573
—
194
15
—
(9,889)
—
(4,591)
(3,708)
(123,611)
(96,877)
102,768
5,891
38,346
1,777
—
—
(268)
—
CUBESMART AND CUBESMART L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF OPERATIONS
CubeSmart (the “Parent Company”) operates as a self-managed and self-administered real estate investment trust (“REIT”) with its
operations conducted solely through CubeSmart, L.P. and its subsidiaries. CubeSmart, L.P., a Delaware limited partnership (the
“Operating Partnership”), operates through an umbrella partnership structure, with the Parent Company, a Maryland REIT, as its sole
general partner. Effective September 14, 2011, the Parent Company changed its name from “U-Store-It Trust” to “CubeSmart” and
the Operating Partnership changed its name from “U-Store-It, L.P.” to “CubeSmart, L.P.” In the notes to the consolidated financial
statements, we use the terms “the Company”, ‘we” or “our” to refer to the Parent Company and the Operating Partnership together,
unless the context indicates otherwise. The Company’s self-storage facilities (collectively, the “Properties”) are located in 22 states
throughout the United States and the District of Columbia and are presented under one reportable segment: we own, operate, develop,
manage and acquire self-storage facilities.
As of December 31, 2012, the Parent Company owned approximately 97.6% of the partnership interests (“OP Units”) of the
Operating Partnership. The remaining OP Units, consisting exclusively of limited partner interests, are held by persons who
contributed their interests in properties to us in exchange for OP Units. Under the partnership agreement, these persons have the right
to tender their OP Units for redemption to the Operating Partnership at any time for cash equal to the fair value of an equivalent
number of common shares of the Parent Company. In lieu of delivering cash, however, the Parent Company, as the Operating
Partnership’s general partner, may, at its option, choose to acquire any OP Units so tendered by issuing common shares in exchange
for the tendered OP Units. If the Parent Company so chooses, its common shares will be exchanged for OP Units on a one-for-one
basis. This one-for-one exchange ratio is subject to adjustment to prevent dilution. With each such exchange or redemption, the
Parent Company’s percentage ownership in the Operating Partnership will increase. In addition, whenever the Parent Company issues
common or other classes of its shares, it contributes the net proceeds it receives from the issuance to the Operating Partnership and the
Operating Partnership issues to the Parent Company an equal number of OP Units or other partnership interests having preferences
and rights that mirror the preferences and rights of the shares issued. This structure is commonly referred to as an umbrella
partnership REIT or “UPREIT.”
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include all of the accounts of the Company, and its majority-owned and/or
controlled subsidiaries. The portion of these entities not owned by the Company is presented as noncontrolling interests as of and
during the periods consolidated. All significant intercompany accounts and transactions have been eliminated in consolidation.
When the Company obtains an economic interest in an entity, the Company evaluates the entity to determine if the entity is deemed
a variable interest entity (“VIE”), and if the Company is deemed to be the primary beneficiary, in accordance with authoritative
guidance issued on the consolidation of VIEs. When an entity is not deemed to be a VIE, the Company considers the provisions of
additional guidance to determine whether a general partner, or the general partners as a group, controls a limited partnership or similar
entity when the limited partners have certain rights. The Company consolidates (i) entities that are VIEs and of which the Company is
deemed to be the primary beneficiary and (ii) entities that are non-VIEs which the Company controls and which the limited partners
do not have the ability to dissolve or remove the Company without cause nor substantive participating rights.
Noncontrolling Interests
The FASB issued authoritative guidance regarding noncontrolling interests in consolidated financial statements which was effective
on January 1, 2009. The guidance states that noncontrolling interests are the portion of equity (net assets) in a subsidiary not
attributable, directly or indirectly, to a parent. The ownership interests in the subsidiary that are held by owners other than the parent
are noncontrolling interests. Under the guidance, such noncontrolling interests are reported on the consolidated balance sheets within
equity, separately from the Company’s equity. On the consolidated statements of operations, revenues, expenses and net income or
loss from less-than-wholly-owned subsidiaries are reported at the consolidated amounts, including both the amounts attributable to the
Company and noncontrolling interests. Presentation of consolidated equity activity is included for both quarterly and annual financial
statements, including beginning balances, activity for the period and ending balances for shareholders’ equity, noncontrolling interests
and total equity.
F-17
However, per the FASB issued authoritative guidance on the classification and measurement of redeemable securities, securities
that are redeemable for cash or other assets at the option of the holder, not solely within the control of the issuer, must be classified
outside of permanent equity. This would result in certain outside ownership interests being included as redeemable noncontrolling
interests outside of permanent equity in the consolidated balance sheets. The Company makes this determination based on terms in
applicable agreements, specifically in relation to redemption provisions. Additionally, with respect to noncontrolling interests for
which the Company has a choice to settle the contract by delivery of its own shares, the Company considered the FASB issued
guidance on accounting for derivative financial instruments indexed to, and potentially settled in, a Company’s own stock to evaluate
whether the Company controls the actions or events necessary to issue the maximum number of shares that could be required to be
delivered under share settlement of the contract. The guidance also requires that noncontrolling interests are adjusted each period so
that the carrying value equals the greater of its carrying value based on the accumulation of historical cost or its redemption fair value.
The consolidated results of the Company include results attributable to units of the Operating Partnership that are not owned by the
Company. These interests were issued in the form of Operating Partnership units and were a component of the consideration the
Company paid to acquire certain self-storage facilities. Limited partners who acquired Operating Partnership units have the right to
require the Operating Partnership to redeem part or all of their Operating Partnership units for, at the Company’s option, an equivalent
number of common shares of the Company or cash based upon the fair value of an equivalent number of common shares of the
Company. However, the operating agreement contains certain circumstances that could result in a net cash settlement outside the
control of the Company, as the Company does not have the ability to settle in unregistered shares. Accordingly, consistent with the
guidance discussed above, the Company will continue to record these noncontrolling interests outside of permanent equity in the
consolidated balance sheets. Net income or loss related to these noncontrolling interests is excluded from net income or loss in the
consolidated statements of operations. The Company has adjusted the carrying value of its noncontrolling interests subject to
redemption value to the extent applicable. Based on the Company’s evaluation of the redemption value of the redeemable
noncontrolling interest, the Operating Partnership reflected these interests at their redemption value at December 31, 2012, as the
estimated redemption value exceeded their carrying value. The Operating Partnership recorded an increase to OP Units owned by third
parties and a corresponding decrease to capital of $19.5 million at December 31, 2012. Disclosure of such redemption provisions is
provided in Note 9.
Noncontrolling interests are the portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. The
ownership interests in the subsidiary that are held by owners other than the parent are noncontrolling interests. Noncontrolling
interests are reported on the consolidated balance sheets within equity, separately from the Company’s equity. On the consolidated
statements of operations, revenues, expenses and net income or loss from less-than-wholly-owned subsidiaries are reported at the
consolidated amounts, including both the amounts attributable to the Company and noncontrolling interests. Presentation of
consolidated equity activity is included for both quarterly and annual financial statements, including beginning balances, activity for
the period and ending balances for shareholders’ equity, noncontrolling interests and total equity.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Although we believe the assumptions and estimates we made are
reasonable and appropriate, as discussed in the applicable sections throughout these consolidated financial statements, different
assumptions and estimates could materially impact our reported results. The current economic environment has increased the degree
of uncertainty inherent in these estimates and assumptions and changes in market conditions could impact our future operating results.
Storage Facilities
Storage facilities are carried at historical cost less accumulated depreciation and impairment losses. The cost of storage facilities
reflects their purchase price or development cost. Costs incurred for the renovation of a storage facility are capitalized to the
Company’s investment in that property. Acquisition costs, ordinary repairs and maintenance are expensed as incurred; major
replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful
lives.
Purchase Price Allocation
When facilities are acquired, the purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed
based on estimated fair values. When a portfolio of facilities is acquired, the purchase price is allocated to the individual facilities
based upon the fair value determined using an income approach or a cash flow analysis using appropriate risk adjusted capitalization
rates, which take into account the relative size, age and location of the individual facility along with current and projected occupancy
and rental rate levels or appraised values, if available. Allocations to the individual assets and liabilities are based upon comparable
market sales information for land, buildings and improvements and estimates of depreciated replacement cost of equipment.
F-18
In allocating the purchase price for an acquisition, the Company determines whether the acquisition includes intangible assets or
liabilities. The Company allocated a portion of the purchase price to an intangible asset attributed to the value of in-place leases. This
intangible is generally amortized to expense over the expected remaining term of the respective leases. Substantially all of the leases
in place at acquired facilities are at market rates, as the majority of the leases are month-to-month contracts. Accordingly, to date no
portion of the purchase price has been allocated to above- or below-market lease intangibles. To date, no intangible asset has been
recorded for the value of tenant relationships, because the Company does not have any concentrations of significant tenants and the
average tenant turnover is fairly frequent.
Depreciation and Amortization
The costs of self-storage facilities and improvements are depreciated using the straight-line method based on useful lives ranging
from five to 40 years.
Impairment of Long-Lived Assets
We evaluate long-lived assets for impairment when events and circumstances such as declines in occupancy and operating results
indicate that there may be impairment. The carrying value of these long-lived assets is compared to the undiscounted future net
operating cash flows, plus a terminal value, attributable to the assets to determine if the property’s basis is recoverable. If a property’s
basis is not considered recoverable, an impairment loss is recorded to the extent the net carrying value of the asset exceeds the fair
value. The impairment loss recognized equals the excess of net carrying value over the related fair value of the asset.
Long-Lived Assets Held for Sale
We consider long-lived assets to be “held for sale” upon satisfaction of the following criteria: (a) management commits to a plan to
sell a facility (or group of facilities), (b) the facility is available for immediate sale in its present condition subject only to terms that
are usual and customary for sales of such facilities, (c) an active program to locate a buyer and other actions required to complete the
plan to sell the facility have been initiated, (d) the sale of the facility is probable and transfer of the asset is expected to be completed
within one year, (e) the facility is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and
(f) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan
will be withdrawn.
Typically these criteria are all met when the relevant asset is under contract, significant non-refundable deposits have been made by
the potential buyer, the assets are immediately available for transfer and there are no contingencies related to the sale that may prevent
the transaction from closing. However, each potential transaction is evaluated based on its separate facts and circumstances.
Properties classified as held for sale are reported at the lesser of carrying value or fair value less estimated costs to sell.
Cash and Cash Equivalents
Cash and cash equivalents are highly-liquid investments with original maturities of three months or less. The Company may
maintain cash equivalents in financial institutions in excess of insured limits, but believes this risk is mitigated by only investing in or
through major financial institutions.
Restricted Cash
Restricted cash consists of purchase deposits and cash deposits required for debt service requirements, capital replacement, and
expense reserves in connection with the requirements of our loan agreements.
Loan Procurement Costs
Loan procurement costs related to borrowings were $11.7 million and $13.0 million at December 31, 2012 and 2011, respectively,
and are reported net of accumulated amortization of $3.4 million and $4.9 million as of December 31, 2012 and 2011, respectively.
The costs are amortized over the estimated life of the related debt using the effective interest method and reported as loan procurement
amortization expense.
F-19
Other Assets
Other assets is comprised of the following as of December 31, 2012 and 2011 (in thousands):
December 31,
2012
2011
Intangible assets, net of accumulated amortization .........
Deposits on future settlements .........................................
Accounts receivable .........................................................
Prepaid insurance .............................................................
Prepaid real estate taxes ...................................................
Others ..............................................................................
$
$
21,670
—
10,209
1,805
1,556
6,554
23,185
9,318
3,676
1,397
1,114
4,955
Total .................................................................................
$
41,794
$
43,645
Environmental Costs
Our practice is to conduct or obtain environmental assessments in connection with the acquisition or development of additional
facilities. Whenever the environmental assessment for one of our facilities indicates that a facility is impacted by soil or groundwater
contamination from prior owners/operators or other sources, we will work with our environmental consultants and where appropriate,
state governmental agencies, to ensure that the facility is either cleaned up, that no cleanup is necessary because the low level of
contamination poses no significant risk to public health or the environment, or that the responsibility for cleanup rests with a third
party.
Revenue Recognition
Management has determined that all of our leases are operating leases. Rental income is recognized in accordance with the terms of
the leases, which generally are month-to-month.
The Company recognizes gains on disposition of properties only upon closing in accordance with the guidance on sales of real
estate. Payments received from purchasers prior to closing are recorded as deposits. Profit on real estate sold is recognized using the
full accrual method upon closing when the collectability of the sales price is reasonably assured and the Company is not obligated to
perform significant activities after the sale. Profit may be deferred in whole or part until the sale meets the requirements of profit
recognition on sales under this guidance.
Advertising and Marketing Costs
The Company incurs advertising and marketing costs primarily attributable to internet marketing campaigns and other media
advertisements. The Company incurred $8.1 million, $6.9 million and $6.6 million in advertising and marketing expenses for the
years ended 2012, 2011 and 2010, respectively.
Equity Offering Costs
Underwriting discounts and commissions, financial advisory fees and offering costs are reflected as a reduction to additional paid-in
capital. For the year ended December 31, 2012 and 2011, the Company recognized $1.7 million and $0.8 million of equity offering
costs related to the issuance of common and preferred shares during the years, respectively.
Other Property Related Income
Other property related income consists of late fees, administrative charges, tenant insurance commissions, sales of storage supplies
and other ancillary revenues and is recognized in the period that it is earned.
Capitalized Interest
The Company capitalizes interest incurred that is directly associated with construction activities until the asset is placed into service.
Interest is capitalized to the related assets using a weighted-average rate of the Company’s outstanding debt. The Company capitalized
$0.2 million for the year ended December 31, 2012, and $0.1 million during each of the years ended 2011 and 2010.
F-20
Derivative Financial Instruments
The Company carries all derivatives on the balance sheet at fair value. The Company determines the fair value of derivatives by
observable prices that are based on inputs not quoted on active markets, but corroborated by market data. The accounting for changes
in the fair value of a derivative instrument depends on whether the derivative has been designated and qualifies as part of a hedging
relationship and, if so, the reason for holding it. The Company’s use of derivative instruments has been limited to cash flow hedges of
certain interest rate risks. Additionally, the Company had interest rate swap agreements for notional principal amounts aggregating
$400 million at December 31, 2012, which are included in accounts payable, accrued expenses and other liabilities.
Income Taxes
The Company elected to be taxed as a real estate investment trust under Sections 856-860 of the Internal Revenue Code beginning
with the period from October 21, 2004 (commencement of operations) through December 31, 2004. In management’s opinion, the
requirements to maintain these elections are being met. Accordingly, no provision for federal income taxes has been reflected in the
consolidated financial statements other than for operations conducted through our taxable REIT subsidiaries.
Earnings and profits, which determine the taxability of distributions to shareholders, differ from net income reported for financial
reporting purposes due to differences in cost basis, the estimated useful lives used to compute depreciation, and the allocation of net
income and loss for financial versus tax reporting purposes. The tax basis in the Company’s assets was $2.3 billion as of
December 31, 2012 and $2.0 billion as of December 31, 2011.
Distributions to shareholders are usually taxable as ordinary income, although a portion of the distribution may be designated as
capital gain or may constitute a non-dividend distribution. Annually, the Company provides each of its shareholders a statement
detailing the tax characterization of dividends paid during the preceding year as ordinary income, capital gain or a non-dividend
distribution. The characterization of the Company’s dividends for 2012 consisted of an 81.7538% ordinary income distribution, a
14.9075% capital gain distribution, and a 3.3387% non-dividend distribution.
Distributions to 7.75% Series A Cumulative Redeemable Preferred Shareholders are usually taxable as ordinary income, although a
portion of the distribution may be designated as capital gain or may constitute a non-dividend distribution. Annually, we provide each
of our shareholders a statement detailing preferred distributions paid during the preceding year and their characterization as ordinary
income, capital gain or non-dividend distribution. The characterization of our preferred dividends for 2012 was as follows: 84.5778%
ordinary income distribution and 15.4222% capital gain distribution.
The Company is subject to a 4% federal excise tax if sufficient taxable income is not distributed within prescribed time limits. The
excise tax equals 4% of the annual amount, if any, by which the sum of (a) 85% of the Company’s ordinary income, (b) 95% of the
Company’s net capital gains and c) 100% of prior taxable income exceeds cash distributions and certain taxes paid by the Company.
No excise tax was incurred in 2012, 2011, or 2010.
Taxable REIT subsidiaries, such as the TRS, are subject to federal and state income taxes. Our taxable REIT subsidiaries have a net
deferred tax asset related to expenses which are deductible for tax purposes in future periods of $0.7 million and $0.4 million,
respectively, as of December 31, 2012 and 2011.
Earnings per Share and Unit
Basic earnings per share and unit is calculated based on the weighted average number of common shares and restricted shares
outstanding during the period. Diluted earnings per share and unit is calculated by further adjusting for the dilutive impact of share
options, unvested restricted shares and contingently issuable shares outstanding during the period using the treasury stock method.
Potentially dilutive securities calculated under the treasury stock method of 2,000,000, 1,378,000 and 1,177,000 in 2012, 2011 and
2010, respectively, were not included in the calculation of diluted earnings per share and unit, as they were identified as anti-dilutive.
Share Based Payments
We apply the fair value method of accounting for contingently issued shares and share options issued under our incentive award
plan. Accordingly, share compensation expense is recorded ratably over the vesting period relating to such contingently issued shares
and options. The Company has recognized compensation expense on a straight-line method over the requisite service period.
F-21
Foreign Currency
The financial statements of foreign subsidiaries are translated to U.S. Dollars using the period-end exchange rate for assets and
liabilities and an average exchange rate for each period for revenues, expenses, and capital expenditures. The local currency is the
functional currency for the Company’s foreign subsidiaries. Translation adjustments for foreign subsidiaries are recorded as a
component of accumulated other comprehensive loss in shareholders’ equity. The Company recognizes transaction gains and losses
arising from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency in
earnings as incurred. The Pound, which represents the functional currency used by USIFB, LLP, our joint venture in England, was
translated at an end-of-period exchange rate of approximately 1.625924 and 1.54902 U.S. Dollars per Pound at December 31, 2012
and December 31, 2011, respectively, and an average exchange rate of 1.585074 and 1.60377 U.S. Dollars per Pound for the years
ended December 31, 2012 and December 31, 2011, respectively. Accordingly, the Company recorded unrealized gains of $0.2 million
on foreign currency translation for the years ended December 31, 2012 and 2011, respectively.
Investments in Unconsolidated Real Estate Ventures
The Company accounts for its investments in unconsolidated Real Estate Ventures under the equity method of accounting. Under
the equity method, investments in unconsolidated joint ventures are recorded initially at cost, as Investments in Real Estate Ventures,
and subsequently adjusted for equity in earnings (losses), cash contributions, less distributions. On a periodic basis, management also
assesses whether there are any indicators that the value of the Company’s investments in unconsolidated Real Estate Ventures may be
other than temporarily impaired. An investment is impaired only if the fair value of the investment, as estimated by management, is
less than the carrying value of the investment and the decline is other than temporary. To the extent impairment has occurred, the loss
shall be measured as the excess of the carrying amount of the investment over the fair value of the investment, as estimated by
management. The determination as to whether impairment exists requires significant management judgment about the fair value of its
ownership interest. Fair value is determined through various valuation techniques, including but not limited to, discounted cash flow
models, quoted market values and third party appraisals.
Recent Accounting Pronouncements
In June 2011, the Financial Accounting Standards Board (FASB) issued an amendment to the accounting standard for the
presentation of comprehensive income. The amendment requires entities to present the total of comprehensive income, the
components of net income, and the components of other comprehensive income either in a single continuous statement of
comprehensive income or in two separate but consecutive statements. In addition, the amendment requires entities to present on the
face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net
income in the statement(s) where the components of net income and the components of other comprehensive income are presented.
This amendment is effective for fiscal years and interim periods beginning after December 15, 2011. The Company’s adoption of the
new standard on January 1, 2012 did not have a material impact on its consolidated financial position or results of operations as the
amendment related only to changes in financial statement presentation.
In May 2011, the FASB issued an update to the accounting standard for measuring and disclosing fair value. The update modifies
the wording used to describe the requirements for fair value measuring and for disclosing information about fair value measurements
to improve consistency between U.S. GAAP and International Financial Reporting Standards (“IFRS”). This update is effective for the
annual and interim periods beginning after December 15, 2011. The adoption of this guidance in 2012 did not have a material impact
on our consolidated financial position or results of operations as its impact was limited to disclosure requirements.
Concentration of Credit Risk
The storage facilities are located in major metropolitan and rural areas and have numerous tenants per facility. No single tenant
represents a significant concentration of our revenues. The facilities in New York, Florida, California, and Texas provided total
revenues of approximately 16%, 15%, 10% and 10%, respectively, for the year ended December 31, 2012. The facilities in Florida,
California, Texas and Illinois provided total revenues of approximately 17%, 12%, 10% and 7%, respectively, for the year ended
December 31, 2011.
F-22
3. STORAGE FACILITIES
The following summarizes the real estate assets of the Company as of December 31, 2012 and December 31, 2011:
December 31,
2012
December 31,
2011
(in thousands)
Land ...................................................
Buildings and improvements ..............
Equipment ..........................................
Construction in progress .....................
Total ...............................................
Less accumulated depreciation ..........
Storage facilities — net ......................
$
$
462,626
1,828,388
143,836
8,172
2,443,022
(353,315)
2,089,707
$
$
417,067
1,574,769
110,371
5,262
2,107,469
(318,749)
1,788,720
F-23
The Company completed the following acquisitions, dispositions and consolidations for the years ended December 31, 2012, 2011
and 2010:
Facility/Portfolio
2012 Acquisitions:
Houston Asset ...............................
Dunwoody Asset ...........................
Mansfield Asset ............................
Texas Assets .................................
Allen Asset ...................................
Norwalk Asset ..............................
Storage Deluxe Assets ..................
Eisenhower Asset ..........................
New Jersey Assets ........................
Georgia/ Florida Assets ................
Peachtree Asset .............................
HSREV Assets ..............................
Leetsdale Asset .............................
Orlando/ West Palm Beach Assets
Exton/ Cherry Hill Assets .............
Carrollton Asset ............................
2012 Dispositions:
Michigan Assets............................
Gulf Coast Assets .........................
New Mexico Assets (b) .................
San Bernardino Asset ....................
Florida/ Tennessee Assets .............
Ohio Assets ...................................
2011 Acquisitions:
Burke Lake Asset ..........................
West Dixie Asset ..........................
White Plains Asset ........................
Phoenix Asset ...............................
Houston Asset ...............................
Duluth Asset .................................
Atlanta Assets ...............................
District Heights Asset ...................
Storage Deluxe Assets ..................
Leesburg Asset .............................
Washington, DC Asset ..................
2011 Dispositions:
Flagship Assets .............................
Portage Asset ................................
2010 Acquisitions:
Frisco Asset ..................................
New York City Assets ..................
Northeast Assets ...........................
Manassas Asset .............................
Apopka Asset ................................
Wyckoff Asset ..............................
McLearen Asset ............................
2010 Dispositions:
Sun City Asset ..............................
Inland Empire/Fayetteville Assets
Location
Transaction Date Number of Facilities
Purchase / Sales
Price (in thousands)
Houston, TX
Dunwoody, GA
Mansfield, TX
Multiple locations in TX
Allen, TX
Norwalk, CT
Multiple locations in NY and CT
Alexandria, VA
Multiple locations in NJ
Multiple locations in GA and FL
Peachtree City, GA
February 2012
February 2012
June 2012
July 2012
July 2012
July 2012
February/ April/
August 2012
August 2012
August 2012
August 2012
August 2012
Multiple locations in PA, NY, NJ, VA and FL September 2012
September 2012
November 2012
December 2012
December 2012
Denver, CO
Multiple locations in FL
Multiple locations in NJ and PA
Carrollton, TX
Multiple locations in MI
Multiple locations in LA, AL and MS
Multiple locations in NM
San Bernardino, CA
Multiple locations in FL and TN
Multiple locations in OH
June 2012
June 2012
August 2012
August 2012
November 2012
November 2012
Fairfax Station, VA
Miami, FL
White Plains, NY
Phoenix, AZ
Houston, TX
Duluth, GA
Atlanta, GA
District Heights, MD
Multiple locations in NY, CT and PA
Leesburg, VA
Washington, DC
January 2011
April 2011
May 2011
May 2011
June 2011
July 2011
July 2011
August 2011
November 2011
November 2011
December 2011
Multiple locations in IN and OH
Portage, MI
August 2011
November 2011
Frisco, TX
New York, NY
Multiple locations in NJ, NY and MA
Manassas, VA
Orlando, FL
Queens, NY
McLearen, VA
July 2010
September 2010
November 2010
November 2010
November 2010
December 2010
December 2010
Sun City, CA
Multiple locations in CA and NC
October 2010
December 2010
F-24
1
1
1
4
1
1
6
1
2
3
1
9
1
2
2
1
37
3
5
6
1
3
8
26
1
1
1
1
1
1
2
1
16
1
1
27
18
1
19
1
2
5
1
1
1
1
12
1
15
16
$
$
$
$
$
$
$
$
$
$
$
$
5,100
6,900
4,970
18,150
5,130
5,000
201,910
19,750
10,750
13,370
3,100
102,000(a)
10,600
13,010
7,800
4,800
432,340
6,362
16,800
7,500
5,000
6,550
17,750
59,962
14,000
13,500
23,000
612
7,600
2,500
6,975
10,400
357,310
13,000
18,250
467,147
43,500
1,700
45,200
5,800
26,700
18,560
6,050
4,235
13,600
10,200
85,145
3,100
35,000
38,100
(a) Purchase price listed represents the fair value of the assets at acquisition.
(b) The Company issued financing in the amount of $5.3 million to the buyer in conjunction with the New Mexico Assets
disposition.
4. ACQUISITIONS
Storage Deluxe Acquisition
During 2012, as part of the $560 million Storage Deluxe transaction involving 22 Class A self-storage facilities located primarily in
the greater New York City area, the Company acquired the final six properties with a purchase price of approximately $201.9 million.
The six properties purchased are located in New York and Connecticut. In connection with the acquisitions, the Company allocated a
portion of the purchase price to the intangible value of in-place leases which aggregated $12.3 million. The estimated life of these in-
place leases is 12 months and the amortization expense that was recognized during 2012 was approximately $7.9 million. In
connection with the six acquired facilities, the Company assumed mortgage debt, and recorded the debt at a fair value of $93.1
million, which includes an outstanding principal balance totaling $88.9 million and a net premium of $4.2 million in addition to the
face value of the assumed debt to reflect the fair values of the debt at the time of assumption.
On November 3, 2011, the Company acquired 16 properties from Storage Deluxe for a purchase price of approximately $357.3
million. The 16 properties purchased are located in New York, Connecticut and Pennsylvania. In connection with this acquisition, the
Company allocated a portion of the purchase price to the intangible value of in-place leases which aggregated $18.1 million. The
estimated life of these in-place leases is 12 months and the amortization expense that was recognized during 2012 was approximately
$15.1 million.
Other 2012 Acquisitions
On September 28, 2012, the Company purchased, from its joint venture partner, the remaining 50% ownership in HSREV. See note
5 — “Investment in Unconsolidated Real Estate Ventures” for additional discussion of this acquisition.
During 2012, the Company acquired an additional 22 self-storage facilities located throughout the United States for an aggregate
purchase price of approximately $128.4 million. In connection with these acquisitions, the Company allocated a portion of the
purchase price to the intangible value of in-place leases which aggregated $13.2 million. The estimated life of these in-place leases is
12 months and the amortization expense that was recognized during 2012 was approximately $4.8 million. In connection with two of
the acquired facilities, the Company assumed mortgage debt, and recorded the debt at a fair value of $13.9 million, which includes an
outstanding principal balance totaling $13.4 million and a net premium of $0.5 million in addition to the face value of the assumed
debt to reflect the fair values of the debt at the time of assumption.
Other 2011 Acquisitions
During 2011, the Company acquired 11 self-storage facilities, in addition to the aforementioned Storage Deluxe Acquisition, located
throughout the United States for an aggregate purchase price of approximately $109.8 million. In connection with these acquisitions,
the Company allocated a portion of the purchase price to the intangible value of in-place leases which aggregated $7.0 million. The
estimated life of these in-place leases is 12 months and the amortization expense that was recognized during 2012 was approximately
$4.2 million. In connection with three of the acquisitions, the Company assumed mortgage debt, and recorded the debt at a fair value
of $21.8 million, which included an outstanding principal balance totaling $21.4 million and a net premium of $0.4 million in addition
to the face value of the assumed debt to reflect the fair values of the debt at the time of assumption.
5. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES
On September 26, 2011, the Company contributed $15.4 million in cash for a 50% interest in HSREV, a partnership that owned
nine storage facilities in Pennsylvania, Virginia, New York, New Jersey and Florida. The other partner held the remaining 50%
interest in the partnership. HSREV was not consolidated because the Company was not the primary beneficiary, the limited partners
had the ability to dissolve or remove the Company without cause and the Company did not possess substantive participating rights.
The Company accounts for its unconsolidated interests in its Real Estate Ventures using the equity method. The Company’s
investment in HSREV was included in Investment in real estate ventures, at equity on the Company’s consolidated balance sheet and
earnings attributable to HSREV were presented in Equity in losses of real estate ventures on the Company’s consolidated statements
of operations.
F-25
As noted in Note 4 — “Acquisitions,” on September 28, 2012, the Company purchased the remaining 50% ownership in HSREV,
for cash of $21.7 million. In addition, upon taking control of these assets, the Company repaid $59.3 million of mortgage loans related
to the properties. Following the acquisition, the Company wholly owns the nine storage facilities which are unencumbered and have a
fair value of $102 million. In connection with this acquisition, the Company allocated a portion of the fair value to the intangible
value of in-place leases which aggregated $8.3 million. The estimated life of these in-place leases is 12 months and the amortization
expense that was recognized during 2012 was approximately $2.1 million. As described above, the Company previously accounted
for its investment in HSREV using the equity method. As a result of this transaction, the Company obtained control of HSREV. The
Company’s original 50% interest was remeasured and as a result, during 2012, the Company recorded a gain of approximately $7.0
million, which is reflected in Gain on remeasurement of investment in real estate venture on the accompanying statements of
operations.
The amounts reflected in the following tables are based on the historical financial information of the real estate venture.
The following is a summary of the financial position of the real estate venture as of December 31, 2011 (in thousands):
December 31,
2011
Assets
Net property ...........................................................
Other assets ............................................................
Total Assets ....................................................
Liabilities and equity
Other liabilities .......................................................
Debt (a) ..................................................................
Equity:
CubeSmart (b) ....................................................
Joint venture partner ...........................................
Total Liabilities and equity ............................
$
$
$
$
78,677
2,242
80,919
867
60,083
9,984
9,985
80,919
(a) The real estate venture’s debt was due to mature on July 31, 2014, with interest payable at 6%. HSREV’s creditors had no
recourse to the general credit of the Company.
(b) The difference between the Company’s share of the net assets of the unconsolidated real estate ventures and the Company’s
investment in real estate ventures per the accompanying consolidated balance sheets relates primarily to purchase price
adjustments that are recorded by the Company on its financial statements in accordance with GAAP, but are not reflected in
the above summary of the financial position of the real estate venture.
The following is a summary of results of operations of the real estate venture for the years ended December 31, 2012 and 2011
(in thousands).
Year ended December 31,
2011
2012
Revenue .............................................................
Operating expenses ...........................................
Interest expense, net ..........................................
Depreciation and amortization ..........................
Net loss ..............................................................
Company’s share of loss ...................................
$
$
7,229
3,010
2,690
2,691
(1,162)
(745)
9,354
3,879
3,969
4,115
(2,609)
(281)
The results of operations above include the periods from September 26, 2011(date of acquisition) through December 31, 2011, and
January 1, 2012 through September 28, 2012 (date of disposition), the date of the Company’s acquisition of the remaining 50%
interest.
F-26
6. UNSECURED SENIOR NOTES
On June 26, 2012, the Operating Partnership issued $250 million in aggregate principal amount of unsecured senior notes due
July 15, 2022 (the “senior notes”) which bear interest at a rate of 4.80%. The senior notes had an effective interest rate of 4.82% at
December 31, 2012. The indenture under which the unsecured senior notes were issued restricts the ability of the Operating
Partnership and its subsidiaries to incur debt unless the Operating Partnership and its consolidated subsidiaries comply with a leverage
ratio not to exceed 60% and an interest coverage ratio of less than 1.5:1 after giving effect to the incurrence of the debt. The indenture
also restricts the ability of the Operating Partnership and its subsidiaries to incur secured debt unless the Operating Partnership and its
consolidated subsidiaries comply with a secured debt leverage ratio not to exceed 40% after giving effect to the incurrence of the
debt. The indenture also contains other financial and customary covenants, including a covenant not to own unencumbered assets
with a value less than 150% of the unsecured indebtedness of the Operating Partnership and its consolidated subsidiaries. The
Operating Partnership is currently in compliance with all of the financial covenants under the senior notes.
7. REVOLVING CREDIT FACILITY AND UNSECURED TERM LOANS
On September 29, 2010, the Company amended the Prior Facility. The Prior Facility, as amended, consisted of a $200 million
unsecured term loan and a $250 million unsecured revolving credit facility and had an outstanding balance of $43 million as of
December 31, 2010. As amended, the Prior Facility had a three-year term expiring on December 7, 2013, was unsecured, and
borrowings on the facility incurred interest on a borrowing spread determined by our leverage levels plus LIBOR.
On June 20, 2011, the Company entered into an unsecured Term Loan Agreement (the “Term Loan Facility”) which consisted of a
$100 million term loan with a five-year maturity and a $100 million term loan with a seven-year maturity. The Term Loan Facility
permits the Company to request additional advances of five-year or seven-year loans in minimum increments of $5 million provided
that the aggregate of such additional advances does not exceed $50 million. The Company incurred costs of $2.1 million in
connection with executing the agreement and capitalized such costs as a component of loan procurement costs, net of amortization on
the consolidated balance sheet. Initially, pricing on the Term Loan Facility ranged, depending on the Company’s leverage levels,
from 1.90% to 2.75% over LIBOR for the five-year loan, and from 2.05% to 2.85% over LIBOR for the seven-year loan, and each
loan has no LIBOR floor. As of December 31, 2011, the Company had received two investment grade ratings, and therefore pricing
on the Term Loan Facility now ranges from 1.45% to 2.10% over LIBOR for the five-year loan and from 1.60% to 2.25% over
LIBOR for the seven-year loan.
On December 9, 2011, the Company entered into a new credit facility comprised of a $100 million unsecured term loan maturing in
December 2014; a $200 million unsecured term loan maturing in March 2017; and a $300 million unsecured revolving facility
maturing in December 2015 (the “Credit Facility”). The Credit Facility replaced in its entirety the Prior Facility.
Pricing on the Credit Facility depends on the Company’s unsecured debt credit rating. At our current Baa3/BBB- level, amounts
drawn under the revolving facility are priced at 1.48% over LIBOR, with no LIBOR floor. Amounts drawn under the term loan
portion of the Credit Facility are priced at 1.75% over LIBOR, with no LIBOR floor.
As of December 31, 2012, $200 million of unsecured term loan borrowings were outstanding under the Term Loan Facility, $300
million of unsecured term loans and $45 million of unsecured revolving loan borrowings were outstanding under the Credit Facility,
and $254.8 million was available for borrowing on the unsecured revolving portion of the Credit Facility. The Company had interest
rate swaps as of December 31, 2012, that fix LIBOR on $200 million of borrowings under the Credit Facility maturing in March 2017
at 1.34%. In addition, at December 31, 2012, the Company had interest rate swaps that fix LIBOR on both the five and seven-year
term loans under the Term Loan Facility through their respective maturity dates. The interest rate swap agreements fix thirty day
LIBOR over the terms of the five and seven-year term loans at 1.80% and 2.47%, respectively. As of December 31, 2012, borrowings
under the Credit Facility and Term Loan Facility had an effective weighted average interest rate of 3.15%.
The Term Loan Facility and the term loans under the Credit Facility were fully drawn at December 31, 2012, and no further
borrowings may be made under those term loans. The Company’s ability to borrow under the revolving portion of the Credit Facility
is subject to ongoing compliance with certain financial covenants which include:
Maximum total indebtedness to total asset value of 60.0% at any time;
Minimum fixed charge coverage ratio of 1.50:1.00; and
Minimum tangible net worth of $821,211,200 plus 75% of net proceeds from equity issuances after June 30, 2010.
F-27
Further, under the Credit Facility and Term Loan Facility, the Company is restricted from paying distributions on our common
shares that would exceed an amount equal to the greater of (i) 95% of our funds from operations, and (ii) such amount as may be
necessary to maintain the Parent Company’s REIT status.
The Company is currently in compliance with all of its financial covenants and anticipates being in compliance with all of its
financial covenants through the terms of the Credit Facility and Term Loan Facility.
8. MORTGAGE LOANS AND NOTES PAYABLE
The Company’s mortgage loans and notes payable are summarized as follows:
Mortgage Loan
YSI 53 ......................................................................................
YSI 6 ........................................................................................
YASKY ....................................................................................
YSI 14 ......................................................................................
YSI 7 ........................................................................................
YSI 8 ........................................................................................
YSI 9 ........................................................................................
YSI 17 ......................................................................................
YSI 27 ......................................................................................
YSI 30 ......................................................................................
USIFB ......................................................................................
YSI 11 ......................................................................................
YSI 5 ........................................................................................
YSI 28 ......................................................................................
YSI 37 ......................................................................................
YSI 44 ......................................................................................
YSI 41 ......................................................................................
YSI 45 ......................................................................................
YSI 48 ......................................................................................
YSI 50 .....................................................................................
YSI 10 ......................................................................................
YSI 15 ......................................................................................
YSI 52 ......................................................................................
YSI 58 ......................................................................................
YSI 29 ......................................................................................
YSI 20 ......................................................................................
YSI 59 ......................................................................................
YSI 60 ......................................................................................
YSI 51 ......................................................................................
YSI 31 ......................................................................................
YSI 35 ......................................................................................
YSI 32 ......................................................................................
YSI 33 ......................................................................................
YSI 39 ......................................................................................
YSI 47 ......................................................................................
YSI 26 ......................................................................................
YSI 57 ......................................................................................
YSI 55 ......................................................................................
YSI 24 ......................................................................................
Unamortized fair value adjustment ..........................................
Carrying Value as of:
December 31,
December 31,
2012
2011
(in thousands)
Effective
Interest Rate
Maturity
Date
$
$
—
—
—
—
2,962
1,692
1,862
3,846
461
6,765
7,221
2,276
3,001
1,460
—
—
—
—
—
—
3,928
1,784
4,721
8,974
13,060
58,524
9,603
3,725
7,325
—
4,373
—
10,930
—
—
9,102
3,195
24,502
29,141
4,326
9,100
74,834
80,000
1,703
3,032
1,733
1,906
3,987
481
7,049
7,125
2,350
3,100
1,509
2,174
1,070
3,775
5,353
24,870
2,260
4,011
1,832
4,884
—
—
60,551
—
—
7,423
13,414
4,464
5,950
11,157
3,867
3,091
—
—
—
—
386
5.93%
5.13%
4.96%
5.97%
6.50%
6.50%
6.50%
6.32%
5.59%
5.59%
3.49%
5.87%
5.25%
5.59%
7.25%
7.00%
6.60%
6.75%
7.25%
6.75%
5.87%
6.41%
5.44%
2.97%
3.69%
5.97%
4.82%
5.04%
6.36%
6.75%
6.90%
6.75%
6.42%
6.50%
6.63%
4.56%
4.61%
4.85%
4.64%
Jul-12
Aug-12
Sep-12
Jan-13
Jun-13
Jun-13
Jun-13
Jul-13
Nov-13
Nov-13
Dec-13
Jan-14
Jan-14
Mar-14
Aug-14
Sep-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Jan-15
Jan-15
Jan-15
Aug-15
Nov-15
Mar-16
Aug-16
Oct-16
Jun-19(a)
Jul-19(a)
Jul-19(a)
Jul-19
Sep-19(a)
Jan-20(a)
Nov-20
Nov-20
Jun-21
Jun-21
Total mortgage loans and notes payable ..................................
$
228,759
$
358,441
F-28
(a) These borrowings have a fixed interest rate for the first five years of their term, which then resets and remains constant over
the final five years of the loan term.
As of December 31, 2012 and 2011, the Company’s mortgage loans payable were secured by certain of its self-storage facilities
with net book values of approximately $440 million and $514 million, respectively. The following table represents the future principal
payment requirements on the outstanding mortgage loans and notes payable at December 31, 2012 (in thousands):
2013 ...................................................................................
2014 ...................................................................................
2015 ...................................................................................
2016 ...................................................................................
2017 ...................................................................................
2018 and thereafter ...........................................................
Total mortgage payments ..................................................
Plus: Unamortized fair value adjustment ...........................
Total mortgage indebtedness ............................................
$
$
30,136
12,149
86,689
21,261
1,863
72,335
224,433
4,326
228,759
The Company currently intends to fund its 2013 principal payment requirements from cash provided by operating activities, new
debt originations, and/or additional borrowings under our unsecured 2011 Credit Facility ($254.8 million available as of December 31,
2012).
9. NONCONTROLLING INTERESTS
Variable Interests in Consolidated Real Estate Joint Ventures
On August 13, 2009, the Company, through a wholly-owned affiliate, formed a joint venture (“HART”) with an affiliate of
Heitman, LLC (“Heitman”) to own and operate 22 self-storage facilities, which are located throughout the United States. Upon
formation, Heitman contributed approximately $51 million of cash to a newly-formed limited partnership and the Company
contributed certain unencumbered wholly-owned properties with an agreed upon value of approximately $102 million to such limited
partnership. In exchange for its contribution of those properties, the Company received a cash distribution from HART of
approximately $51 million and retained a 50% interest in HART. The Company was the managing partner of HART and managed the
properties owned by HART in exchange for a market rate management fee. The Company determined that HART was a variable
interest entity, and that the Company was the primary beneficiary. Accordingly, the Company consolidated the assets, liabilities and
results of operations of HART. The 50% interest that was owned by Heitman was reflected as noncontrolling interest in subsidiaries
within permanent equity, separate from the Company’s equity on the consolidated balance sheets.
On August 13, 2012, the Company purchased the remaining 50% interest in HART from Heitman for $61.1 million, and now owns
100% of HART. Accordingly, the Company wholly owns the properties which are unencumbered by any property-level secured debt.
The Company previously consolidated HART, and therefore the acquisition of the remaining 50% interest is reflected in the equity
section of the accompanying consolidated balance sheets. As a result of the transaction, the Company eliminated noncontrolling
interest in subsidiaries of $38.7 million and recorded a reduction to additional paid in capital of $18.5 million.
USIFB, LLP (“the Venture”) was formed to own, operate, acquire and develop self-storage facilities in England. The Company
owns a 97% interest in the Venture through a wholly-owned subsidiary and the Venture commenced operations at two facilities in
London, England during 2008. The Company determined that the Venture is a variable interest entity, and that the Company is the
primary beneficiary. Accordingly, the Company consolidates the assets, liabilities and results of operations of the Venture. At
December 31, 2012, the Venture had total assets of $11.8 million and total liabilities of $7.9 million, including two mortgage loans
totaling $7.2 million secured by storage facilities with a net book value of $11.6 million. At December 31, 2012, the Venture’s
creditors had no recourse to the general credit of the Company.
Operating Partnership Ownership
The Company follows guidance regarding the classification and measurement of redeemable securities. Under this guidance,
securities that are redeemable for cash or other assets, at the option of the holder and not solely within the control of the issuer, must
be classified outside of permanent equity/capital. This classification results in certain outside ownership interests being included as
redeemable noncontrolling interests outside of permanent equity/capital in the consolidated balance sheets. The Company makes this
determination based on terms in applicable agreements, specifically in relation to redemption provisions.
F-29
Additionally, with respect to redeemable ownership interests in the Limited Partnership held by third parties for which CubeSmart
has a choice to settle the redemption by delivery of its own shares, the Operating Partnership considered the guidance regarding
accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own shares, to evaluate whether
CubeSmart controls the actions or events necessary to presume share settlement. The guidance also requires that noncontrolling
interests classified outside of permanent capital be adjusted each period to the greater of the carrying value based on the accumulation
of historical cost or the redemption value.
Approximately 2.4% of the outstanding OP Units as of December 31, 2012 and 3.7% of the outstanding OP Units as of
December 31, 2011 were not owned by the general partner. The interests in the Operating Partnership represented by these OP Units
were a component of the consideration that the Operating Partnership paid to acquire certain self-storage facilities. The holders of the
OP Units are limited partners in the Operating Partnership and have the right to require CubeSmart to redeem all or part of their OP
Units for, at the general partner’s option, an equivalent number of common shares of CubeSmart or cash based upon the fair value of
an equivalent number of common shares of CubeSmart. However, the partnership agreement contains certain provisions that could
result in a settlement outside the control of CubeSmart and the Operating Partnership, as CubeSmart does not have the ability to settle
in unregistered shares. Accordingly, consistent with the guidance, the Operating Partnership will record the OP Units owned by third
parties outside of permanent capital in the consolidated balance sheets. Net income or loss related to the OP Units owned by third
parties is excluded from net income or loss attributable to Operating Partner in the consolidated statements of operations.
The per Unit cash redemption amount would equal the average of the closing prices of the common shares of CubeSmart on the
New York Stock Exchange for the 10 trading days ending prior to CubeSmart’s receipt of the redemption notice for the applicable
Unit. At December 31, 2012 and 2011, 3,293,730 and 4,674,136 OP units, respectively, were outstanding and the calculated aggregate
redemption value of outstanding OP units was based upon CubeSmart’s average closing share prices. Based on the Company’s
evaluation of the redemption value of the redeemable noncontrolling interest, the Company has reflected these interests at their
redemption value at December 31, 2012 and 2011, as the estimated redemption value exceeded their carrying value. The Operating
Partnership recorded an increase to OP Units owned by third parties and a corresponding decrease to capital of $19.5 million and $7.1
million at December 31, 2012 and 2011, respectively.
10. RELATED PARTY TRANSACTIONS
Corporate Office Leases
Subsequent to its entry into lease agreements with related parties for office space, the Operating Partnership entered into sublease
agreements with various unrelated tenants for the related office space. Each of these properties are part of Airport Executive Park, a
50-acre office and flex development located in Cleveland, Ohio, which is owned by former executives. Our independent Trustees
approved the terms of, and entry into, each of the office lease agreements by the Operating Partnership. The table below shows the
office space subject to these lease agreements and certain key provisions, including the term of each lease agreement, the period for
which the Operating Partnership may extend the term of each lease agreement, and the minimum and maximum rents payable per
month during the term.
Office Space
The Parkview Building — 6745 Engle
Road; and 6751 Engle Road................
6745 Engle Road — Suite 100 ...............
6745 Engle Road — Suite 110 ...............
6751 Engle Road — Suites C and D .......
Approximate
Square Footage
Maturity
Date
Period of
Extension Option (1)
Fixed Minimum
Rent Per Month
Fixed
Maximum Rent
Per Month
21,900 12/31/2014 Five-year
2,212 12/31/2014 Five-year
1,731 12/31/2014 Five-year
3,000 12/31/2014 Five-year
$
$
$
$
25,673 $
3,051 $
2,387 $
3,137 $
31,205
3,709
2,901
3,771
(1) Our Operating Partnership may extend the lease agreement beyond the termination date by the period set forth in this column
at prevailing market rates upon the same terms and conditions contained in each of the lease agreements.
In addition to monthly rent, the office lease agreements provide that our Operating Partnership reimburse for certain maintenance
and improvements to the leased office space. The total amounts of lease payments incurred under the six office leases during the
years ended December 31, 2012 and December 31, 2011 were approximately $0.5 million.
F-30
Total future minimum rental payments due in accordance with the related party lease agreements and total future cash receipts due
from our subtenants as of December 31, 2012 are as follows:
2013 ..........................................
2014 ..........................................
$
$
Due to Related Party
Amount
Due from Subtenant
Amount
(in thousands)
499
499
998
$
$
314
315
629
11. DISCONTINUED OPERATIONS
For the years ended December 31, 2012, 2011 and 2010, discontinued operations relates to 26 properties that the Company sold
during 2012, 19 properties that the Company sold during 2011, and 16 properties that the Company sold during 2010. Each of the
sales during 2012, 2011 and 2010 resulted in the recognition of a gain, which in the aggregate totaled $9.8 million, $3.9 million, and
$1.8 million, respectively.
The following table summarizes the revenue and expense information for the period the Company owned the properties classified
as discontinued operations during the years ended December 31, 2012, 2011 and 2010 (in thousands):
REVENUES
Rental income ..............................................................
Other property related income .....................................
Total revenues ..........................................................
OPERATING EXPENSES
Property operating expenses ........................................
Depreciation and amortization .....................................
Total operating expenses .........................................
OPERATING INCOME ...............................................
Income from discontinued operations ..........................
Gain on disposition of discontinued operations ...........
Income from discontinued operations ......................
$
$
12. COMMITMENTS AND CONTINGENCIES
2012
For the year ended December 31,
2011
2010
$
6,278
748
7,026
3,409
1,504
4,913
2,113
2,113
9,811
11,924
$
13,445
3,410
16,855
6,570
3,127
9,697
7,158
7,158
3,903
11,061
$
$
21,316
2,117
23,433
10,498
5,780
16,278
7,155
7,155
1,826
8,981
The Company currently owns five self-storage facilities subject to ground leases and four other self-storage facilities having only
parcels of land that are subject to ground leases. The Company recorded ground rent expense of approximately $1.2 million,
$0.3 million, and $0.2 million for the years ended December 31, 2012, 2011 and 2010, respectively. Total future minimum rental
payments under non-cancelable ground leases are as follows:
2013 ......................................................
2014 ......................................................
2015 ......................................................
2016 ......................................................
2017 ......................................................
2018 and thereafter ...............................
Ground Lease
Amount
(in thousands)
$
$
1,206
1,192
1,191
1,182
1,192
55,970
61,933
The Company has a development agreement for the construction of a new corporate office headquarters and storage facility which
will require payments of approximately $13.5 million, due in installments upon completion of certain construction milestones, during
2013.
F-31
The Company has been named as a defendant in lawsuits in the ordinary course of business. In most instances, these claims are
covered by the Company’s liability insurance coverage. Management believes that the ultimate settlement of the suits will not have a
material adverse effect on the Company’s financial statements.
13. RISK MANAGEMENT AND USE OF FINANCIAL INSTRUMENTS
The Company’s use of derivative instruments is limited to the utilization of interest rate agreements or other instruments to manage
interest rate risk exposures and not for speculative purposes. The principal objective of such arrangements is to minimize the risks
and/or costs associated with the Company’s operating and financial structure, as well as to hedge specific transactions. The
counterparties to these arrangements are major financial institutions with which the Company and its subsidiaries may also have other
financial relationships. The Company is potentially exposed to credit loss in the event of non-performance by these counterparties.
However, because of the high credit ratings of the counterparties, the Company does not anticipate that any of the counterparties will
fail to meet these obligations as they come due. The Company does not hedge credit or property value market risks.
The Company has entered into interest rate swap agreements that qualify and are designated as cash flow hedges designed to reduce
the impact of interest rate changes on its variable rate debt. Therefore, the interest rate swaps are recorded in the consolidated balance
sheet at fair value and the related gains or losses are deferred in shareholders’ equity as Accumulated Other Comprehensive Loss.
These deferred gains and losses are amortized into interest expense during the period or periods in which the related interest payments
affect earnings. However, to the extent that the interest rate swaps are not perfectly effective in offsetting the change in value of the
interest payments being hedged, the ineffective portion of these contracts is recognized in earnings immediately.
The Company formally assesses, both at inception of a hedge and on an on-going basis, whether each derivative is highly-effective
in offsetting changes in cash flows of the hedged item. If management determines that a derivative is highly-effective as a hedge, then
the Company accounts for the derivative using hedge accounting, pursuant to which gains or losses inherent in the derivative do not
impact the Company’s results of operations. If management determines that a derivative is not highly-effective as a hedge or if a
derivative ceases to be a highly-effective hedge, the Company will discontinue hedge accounting prospectively and will reflect in its
statement of operations realized and unrealized gains and losses in respect of the derivative.
The following table summarizes the terms and fair values of the Company’s derivative financial instruments at December 31, 2012
and December 31, 2011, respectively (dollars in thousands):
Hedge
Product
Hedge Type
Notional
Amount
Strike
Effective Date
Maturity
2012
2011
Year Ended December 31,
Swap
Swap
Swap
Swap
Swap
Swap
Swap
Swap
Swap
Swap
Cash flow
Cash flow
Cash flow
Cash flow
Cash flow
Cash flow
Cash flow
Cash flow
Cash flow
Cash flow
(a) $
(a) $
(a) $
(a) $
(a) $
(a) $
(a) $
(a) $
(a) $
(a) $
$
40,000
40,000
20,000
75,000
50,000
50,000
25,000
40,000
40,000
20,000
400,000
1.8025% 6/20/2011
1.8025% 6/20/2011
1.8025% 6/20/2011
1.3360% 12/30/2011
1.3360% 12/30/2011
1.3360% 12/30/2011
1.3375% 12/30/2011
2.4590% 6/20/2011
2.4725% 6/20/2011
2.4750% 6/20/2011
6/20/2016 $
6/20/2016
6/20/2016
3/31/2017
3/31/2017
3/31/2017
3/31/2017
6/20/2018
6/20/2018
6/20/2018
$
(1,873) $
(1,875)
(937)
(2,378)
(1,583)
(1,583)
(799)
(3,433)
(3,470)
(1,734)
(19,665) $
(1,494)
(1,502)
(727)
(907)
(484)
(485)
(319)
(2,553)
(2,628)
(1,295)
(12,394)
(a) Hedging unsecured variable rate debt by fixing 30-day LIBOR.
The Company measures its derivative instruments at fair value and records them in the balance sheet as either an asset or liability.
As of December 31, 2012 and 2011, all derivative instruments were included in accounts payable, accrued expenses and other
liabilities in the accompanying consolidated balance sheets. The effective portions of changes in the fair value of the derivatives are
reported in accumulated other comprehensive income (loss). Amounts reported in accumulated other comprehensive loss related to
derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. The change in
unrealized loss on interest rate swap reflects a reclassification of $6.0 million of unrealized losses from accumulated other
comprehensive loss as an increase to interest expense during 2012. During 2013, the Company estimates that an additional
$6.1 million will be reclassified as an increase to interest expense.
F-32
14. FAIR VALUE MEASUREMENTS
The Company applies the methods of fair value as described in authoritative guidance, to value its financial assets and liabilities. As
defined in the guidance, fair value is based on the price that would be received from the sale of an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair
value measurements, the guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to
measure fair value into three broad levels, which are described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The
fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest
priority to Level 3 inputs.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the
use of unobservable inputs, to the extent possible, as well as considering counterparty credit risk in its assessment of fair value.
Financial assets and liabilities carried at fair value as of December 31, 2012 are classified in the table below in one of the three
categories described above (dollars in thousands):
Interest Rate Swap Derivative Liabilities ...................
Total liabilities at fair value ........................................
Level 1
Level 2
Level 3
$
$
—
—
$
$
19,665
19,665
$
$
—
—
Financial assets and liabilities carried at fair value as of December 31, 2011 are classified in the table below in one of the three
categories described above (dollars in thousands):
Interest Rate Swap Derivative Liabilities ...................
Total liabilities at fair value ........................................
Level 1
Level 2
Level 3
$
$
—
—
$
$
12,394
12,394
$
$
—
—
Financial assets and liabilities carried at fair value were classified as Level 2 inputs. For financial liabilities that utilize Level 2
inputs, the Company utilizes both direct and indirect observable price quotes, including LIBOR yield curves, bank price quotes for
forward starting swaps, NYMEX futures pricing and common stock price quotes. Below is a summary of valuation techniques for
Level 2 financial liabilities:
Interest rate swap derivative assets and liabilities — valued using LIBOR yield curves at the reporting date. Counterparties
to these contracts are most often highly rated financial institutions, none of which experienced any significant downgrades in
2012 that would reduce the amount owed by the Company. Although we have determined that the majority of the inputs
used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with
our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us
and the counterparties. However, as of December 31, 2012 we have assessed the significance of the effect of the credit
valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation
adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative
valuations in their entirety are classified in Level 2 of the fair value hierarchy.
F-33
The following are fair value measurements recorded on a nonrecurring basis as of December 31, 2012. There were no nonrecurring
fair value measurements as of December 31, 2011 (in thousands):
Fair Value Measurements as of December 31, 2012
Balance
Level 1
Level 2
Level 3
Investment in real estate ventures, at equity ......
Total assets ........................................................
$
$
—
—
$
$
—
—
$
$
—
$
20,579
—
$
20,579
Total
Gains (1)
$
$
7,023
7,023
(1) Represents gain on remeasurement of investment in real estate venture. See note 5 — “Investment in Unconsolidated
Real Estate Ventures” for additional discussion.
Fair value for those assets measured using Level 3 inputs was determined through the use of a direct capitalization approach. The
direct capitalization approach applies a projected yield for the investment to the estimated stabilized income for the property. Yield
rates utilized in this approach are derived from market transactions as well as other financial and industry data. The yield rates used in
determining the fair value of HSREV ranged from 6%-7%.
The fair values of financial instruments, including cash and cash equivalents, accounts receivable and accounts payable
approximates their respective carrying values at December 31, 2012 and 2011. The Company had fixed interest rate loans with a
carrying value of $873.3 million and $758.4 million at December 31, 2012 and 2011, respectively. The estimated fair values of these
fixed rate loans were $866.9 million and $736.3 million at December 31, 2012 and 2011, respectively. The Company had variable
interest rate loans with a carrying value of $150.4 million at December 31, 2012. The estimated fair value of the variable interest rate
loan approximates its carrying value due to its floating rate nature and market spreads. This estimate is based on a discounted cash
flow analysis assuming market interest rates for comparable obligations at December 31, 2012. The Company estimates the fair value
of its fixed rate debt and the credit spreads over variable market rates on its variable rate debt by discounting the future cash flows of
each instrument at estimated market rates or credit spreads consistent with the maturity of the debt obligation with similar credit
policies, which is classified within level 2 of the fair value hierarchy. Rates and credit spreads take into consideration general market
conditions and maturity.
15. SHARE-BASED COMPENSATION PLANS
On June 2, 2010 the Company’s shareholders approved an amendment and restatement of the Company’s 2007 Equity Incentive
Plan, a share-based employee compensation plan originally approved by shareholders on May 8, 2007 (as amended and restated, the
“2007 Plan”). On October 19, 2004, the Company’s sole shareholder approved a share-based employee compensation plan, the 2004
Equity Incentive Plan (the “2004 Plan” and collectively with the 2007 Plan, the “Plans”). The purpose of the Plans is to attract and
retain highly qualified executive officers, Trustees and key employees and other persons and to motivate such officers, Trustees, key
employees and other persons to serve the Company and its affiliates to expend maximum effort to improve the business results and
earnings of the Company, by providing to such persons an opportunity to acquire or increase a direct proprietary interest in the
operations and future success of the Company. To this end, the Plans provide for the grant of share options, share appreciation rights,
restricted shares, share units, unrestricted shares, dividend equivalent rights and cash awards. Any of these awards may, but need not,
be made as performance incentives to reward attainment of annual or long-term performance goals. Share options granted under the
Plans may be non-qualified share options or incentive share options.
The Plans are administered by the Compensation Committee of the Company’s Board of Trustees (the “Compensation
Committee”), which is appointed by the Board of Trustees. The Compensation Committee interprets the Plans and, subject to its right
to delegate authority to grant awards, determines the terms and provisions of option grants and share awards.
The 2007 Plan uses a “Fungible Units” methodology for computing the maximum number of common shares available for issuance
under the 2007 Plan. The Fungible Units methodology assigns weighted values to different types of awards under the 2007 Plan
without assigning specific numerical limits for different types of awards. Upon shareholder approval of the amendment and
restatement of the 2007 plan in June 2010, a “Fungible Pool Limit” was established consisting of 4,728,561 shares plus any common
shares restored to availability upon expiration or forfeiture of then-currently outstanding options or restricted share awards (consisting
of 372,135 shares).
F-34
The 2007 Plan provides that any common shares made the subject of awards in the form of options or share appreciation rights shall
be counted against the Fungible Pool Limit as one (1) unit. Any common shares made the subject of awards under the 2007 Plan in
the form of restricted shares or share units (each a “Full-Value Award”) shall be counted against the Fungible Pool Limit as 1.66 units.
The Fungible Pool Limit and the computation of the number of common shares available for issuance are subject to adjustment upon
certain corporate transactions or events, including share splits, reverse share splits and recapitalizations. The number of shares
counted against the Fungible Pool Limit includes the full number of shares subject to the award, and is not reduced in the event shares
are withheld to fund withholding tax obligations, or, in the case of options and share appreciation rights, where shares are applied to
pay the exercise price. If an option or other award granted under the 2007 Plan expires, is forfeited or otherwise terminates, the
common shares subject to any portion of such option or other award that expires, is forfeited or that otherwise terminates, as the case
may be, will again become available for issuance under the 2007 Plan.
In addition to the overall limit on the number of shares that may be subject to awards under the 2007 Plan, the 2007 Plan limits the
number of shares that may be the subject of awards during the three-year period ending December 31, 2012. Specifically, the average
of the following three ratios (each expressed as a percentage) shall not exceed the greater of two percent (2%) or the mean of the
Company’s GICS peer group for the three-year period beginning January 1, 2010 and ending December 31, 2012. The three ratios
would correspond to the three calendar years in the three-year period ending December 31, 2012, and each ratio would be computed as
(i) the number of shares subject to awards granted in the applicable year divided by (ii) the sum of the number of common shares and
units of the Company’s operating partnership (“OP Units”) exchangeable into common shares outstanding at the end of such year.
Solely for purposes of calculating the number of shares subject to awards under this limitation, shares underlying Full-Value Awards
will be taken into account in the numerator of the foregoing ratios as 1.5 shares.
Subject to adjustment upon certain corporate transactions or events, a participant may not receive awards (with shares subject to
awards being counted, depending on the type of award, in the proportions ranging from 1.0 to 1.66), as described above in any one
calendar year covering more than 1,000,000 units.
With respect to the 2004 Plan, a total of 3 million common shares are reserved for issuance under the 2004 Plan. The maximum
number of common shares underlying equity awards that may be granted to an individual participant under the 2004 Plan during any
calendar year is 400,000 for options or share appreciation rights and 100,000 for restricted shares or restricted share units. The
maximum number of common shares that can be awarded under the Plan to any person, other than pursuant to an option, share
appreciation rights or time-vested restricted shares, is 250,000 per calendar year under the 2004 Plan. To the extent that options expire
unexercised or are terminated, surrendered or canceled, the options and share awards become available for future grants under the
2004 Plan, unless the 2004 Plan has been terminated.
Under the Plans, the Compensation Committee determines the vesting schedule of each share award and option. The exercise price
for options is equivalent to the fair value of the underlying common shares at the grant date. The Compensation Committee also
determines the term of each option, which shall not exceed 10 years from the grant date.
Share Options
The fair values for options granted in 2012, 2011, and 2010 were estimated at the time the options were granted using the Black-
Scholes option-pricing model applying the following weighted average assumptions:
Assumptions:
Risk-free interest rate ...........................................................................
Expected dividend yield ......................................................................
Volatility (a) .........................................................................................
Weighted average expected life of the options (b) ...............................
Weighted average grant date fair value of options granted per share ...
2012
2.0%
4.5%
52.22%
9.59 years
3.94
$
$
2011
3.3%
4.8%
54.60%
9.9 years
3.40
2010
3.7%
5.4%
57.60%
9.9 years
2.60
$
(a) Expected volatility is based upon the level of volatility historically experienced.
(b) Expected life is based upon our expectations of stock option recipients’ expected exercise and termination patterns.
The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options. In addition, option-
pricing models require the input of highly subjective assumptions, including the expected stock price volatility. Volatility for the 2010,
2011, and 2012 grants was based on the trading history of the Company’s shares.
F-35
In 2012, 2011, and 2010, the Company recognized compensation expense related to options issued to employees and executives of
approximately $1.2 million, $1.5 million and $1.9 million, respectively, which was recorded in general and administrative expense.
Approximately 222,421 share options were issued during 2012 for which the fair value of the options at their respective grant dates
was approximately $0.9 million, which vest over three and five years. As of December 31, 2012, the Company had approximately
$1.1 million of unrecognized option compensation cost related to all grants that will be recorded over the next five years.
The table below summarizes the option activity under the Plan for the years ended December 31, 2012, 2011 and 2010:
Number of Shares
Weighted Average
Remaining
Under Option
Exercise Price
Contractual Term
Weighted Average
Balance at December 31, 2009 ............................................
Options granted................................................................
Options canceled ..............................................................
Options exercised ............................................................
Balance at December 31, 2010 ............................................
Options granted................................................................
Options canceled ..............................................................
Options exercised ............................................................
Balance at December 31, 2011 ............................................
Options granted................................................................
Options canceled ..............................................................
Options exercised ............................................................
Balance at December 31, 2012 ............................................
Vested or expected to vest at December 31, 2012 ...............
Exercisable at December 31, 2012 ......................................
4,546,304
574,556
(50,875)
(56,225)
5,013,760
346,882
(80,924)
(24,000)
5,255,718
222,421
(10,375)
(209,900)
5,257,864
5,257,864
4,549,227
$
$
$
$
$
$
10.71
7.32
12.71
3.46
10.38
9.38
9.40
5.06
10.35
11.48
9.01
7.89
10.50
10.50
10.69
7.95
9.06
—
8.11
7.18
9.11
—
6.84
6.33
9.14
—
6.08
5.49
5.49
5.13
At December 31, 2012, the aggregate intrinsic value of options outstanding, of options that vested or expected to vest and of options
that were exercisable was approximately $27.6 million. The aggregate intrinsic value of options exercised was approximately $2.6
million for the year ended December 31, 2012.
Restricted Shares
The Company applies the fair value method of accounting for contingently issued shares. As such, each grant is recognized ratably
over the related vesting period. Approximately 595,000 restricted shares were issued during 2012 for which the fair value of the
restricted shares at their respective grant dates was approximately $6.9 million, which vest over three and five years. During 2011,
approximately 314,000 restricted shares were issued for which the fair value of the restricted shares at their respective grant dates was
approximately $2.6 million. As of December 31, 2012 the Company had approximately $5.3 million of remaining unrecognized
restricted share compensation costs that will be recognized over the next four years. Restricted share awards are considered to be
performance awards and are valued using the stock price on the grant date.
In 2012, 2011 and 2010, the Company recognized compensation expense related to restricted shares issued to employees and
Trustees of approximately $3.9 million, $2.2 million, and $1.8 million, respectively; these amounts were recorded in general and
administrative expense. The following table presents non-vested restricted share activity during 2012:
Non-Vested at January 1, 2012 ...............................................................................................
Granted ...................................................................................................................................
Vested .....................................................................................................................................
Forfeited .................................................................................................................................
Non-Vested at December 31, 2012 .........................................................................................
Number of Non-
Vested Restricted
Shares
559,433
595,348
(299,161)
(2,480)
853,140
F-36
On January 25, 2012, 49,981 restricted share units were granted to certain executives. The restricted share units were granted in the
form of deferred share units with a market condition, entitling the holders thereof to receive common shares at a future date. The
deferred share units will be awarded based on the Company’s total return to shareholders with respect to a specified peer group
consisting of publicly traded companies over a three-year period. The fair value of the restricted share units on the grant date was
approximately $0.8 million. The Company used a Monte Carlo simulation analysis to estimate the fair value of the awards. The
restricted share units will cliff vest upon the third anniversary of the effective date, or December 31, 2014.
On May 30, 2012, 274,668 restricted share units were granted to the Company’s chief executive officer. The restricted share units
were granted in the form of deferred share units with a market condition, entitling the holder thereof to receive common shares at a
future date. The deferred share units will be awarded based on the price return of the Company’s stock price over a two-year period.
The fair value of the restricted share units on the grant date was approximately $3.0 million. The Company used a Monte Carlo
simulation analysis to estimate the fair value of the award. The restricted share units will cliff vest on December 31, 2013.
16. EARNINGS PER SHARE AND UNIT AND SHAREHOLDERS’ EQUITY AND CAPITAL
Earnings per share and Shareholders’ Equity
The following is a summary of the elements used in calculating basic and diluted earnings per share:
For the year ended December 31,
2011
(Dollars and shares in thousands, except per share amounts)
2012
2010
Loss from continuing operations ......................................
Noncontrolling interests in the Operating Partnership ......
Noncontrolling interest in subsidiaries ..............................
Distribution to Preferred Shares (1) ..................................
Loss from continuing operations attributable to the
$
(8,296) $
393
(1,918)
(6,008)
(8,614 ) $
474
(2,810)
(1,218)
(15,000)
848
(1,755)
—
Company’s common shareholders ................................
$
(15,829) $
(12,168 ) $
(15,907)
Total discontinued operations ..........................................
Noncontrolling interests in the Operating Partnership ......
Total discontinued operations attributable to the
11,924
(286)
11,061
(509)
8,981
(467)
Company’s common shareholders ................................
$
11,638 $
10,552 $
8,514
Net loss attributable to the Company’s common
shareholders ..................................................................
$
(4,191) $
(1,616 ) $
(7,393)
Weighted-average shares outstanding ..............................
Share options and restricted share units (2) ......................
Weighted-average diluted shares outstanding (3) .........
124,548
—
124,548
102,976
—
102,976
Earning (loss) per Common Share:
Continuing operations ..............................................
Discontinued operations ...........................................
Basic and diluted loss per share ........................................
$
$
(0.13) $
0.10
(0.03) $
(0.12 ) $
0.10
(0.02 ) $
93,998
—
93,998
(0.17)
0.09
(0.08)
F-37
Earnings per unit and Capital
The following is a summary of the elements used in calculating basic and diluted earnings per unit:
Loss from continuing operations ..........................
Limited Partnership interest of third parties ..........
Noncontrolling interest in subsidiaries ..................
Distribution to Preferred units (1) .........................
Loss from continuing operations attributable to
$
For the year ended December 31,
2010
2011
(Dollars and units in thousands, except per unit amounts)
2012
(8,296) $
393
(1,918)
(6,008)
(8,614) $
474
(2,810)
(1,218)
(15,000)
848
(1,755)
—
common unitholders ..........................................
$
(15,829) $
(12,168) $
(15,907)
Total discontinued operations ..............................
Limited Partnership interest of third parties ..........
Total discontinued operations attributable to
common unitholders ..........................................
Net loss attributable to common unitholders ........
Weighted-average units outstanding ....................
Unit options and restricted unit units (2) ...............
Weighted-average diluted units
outstanding (3) ..............................................
Earning (loss) per Common unit:
Continuing operations ..................................
Discontinued operations ...............................
Basic and diluted loss per unit ...............................
$
$
$
$
11,924
(286)
11,061
(509)
11,638
$
10,552
$
8,981
(467)
8,514
(4,191) $
(1,616) $
(7,393)
124,548
—
124,548
102,976
—
102,976
(0.13) $
0.10
(0.03) $
(0.12) $
0.10
(0.02) $
93,998
—
93,998
(0.17)
0.09
(0.08)
(1) For the year ended December 31, 2012, 2011 and 2010, the Company declared cash dividends per preferred share/unit of $1.936,
$0.393 and $0.000, respectively.
(2) For the years ended December 31, 2012, 2011 and 2010, the potentially dilutive shares/units of approximately 2,000,000,
1,378,000, and 1,177,000 respectively, were not included in the earnings per share/unit calculation as their effect is antidilutive.
(3) For the years ended December 31, 2012, 2011 and 2010, the Company declared cash dividends per common share/unit of $0.350,
$0.290 and $0.145, respectively.
The Operating Partnership units and common units have essentially the same economic characteristics as they unit equally in the
total net income or loss and distributions of the Operating Partnership. An Operating Partnership unit may be redeemed for cash, or at
the Company’s option, common units on a one-for-one basis. Outstanding noncontrolling interest units in the Operating Partnership
were 3,293,730, 4,674,136 and 4,737,136 as of December 31, 2012, 2011 and 2010, respectively. There were 131,794,547 and
122,058,919 common units outstanding as of December 31, 2012 and 2011, respectively.
Issuance of Common and Preferred Shares
On September 16, 2011, the Company amended its sales agreement with Cantor Fitzgerald & Co. (the “Sales Agent”) dated April 3,
2009 and as amended on January 26, 2011 to increase the number of common shares that the Sales Agent may sell under the Sales
Agreement from 15 million to 20 million. During the year ended December 31, 2011 the Company sold 140,000 shares under the
program at an average sales price of $10.75 per share resulting in gross proceeds of $1.5 million. During the year ended
December 31, 2012 the Company sold 7.9 million shares under the program at an average sales price of $13.13 per share resulting in
gross proceeds of $103.8 million ($163.8 million of gross proceeds and 16.1 million shares sold with an average sales price of $10.16
since program inception in 2009).
F-38
On October 28, 2011, the Company completed a public offering of 23 million common shares at a public offering price of $9.20,
which reflects the full exercise by the underwriters of their option to purchase 3 million shares to cover over-allotments. The Company
received approximately $202.5 million in net proceeds from the offering after deducting the underwriting discount and other estimated
offering expenses.
During November 2011, the Company completed an underwritten public offer of 3.1 million of the Company’s Series A preferred
shares at a public offering price of $25.00 per share for gross proceeds of $77.5 million. The financing provided approximately $74.8
million in net proceeds to the Company after deducting the underwriting discount and offering expenses.
The Company used the net proceeds from the 2011 common and preferred public offerings to fund a portion of the cash purchase
price of the Storage Deluxe Acquisition on November 3, 2011. The Company used the net proceeds from the 2012 common offerings
to fund the 2012 acquisitions and pay down multiple mortgages during the year.
17. INCOME TAXES
Deferred income taxes are established for temporary differences between financial reporting basis and tax basis of assets and
liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. A valuation allowance for deferred
tax assets is provided if the Company believes that it is more likely than not that all or some portion of the deferred tax asset will not
be realized. No valuation allowance was recorded at December 31, 2012 or 2011. The Company had net deferred tax assets of $0.7
million and $0.4 million, which are included in other assets as of December 31, 2012 and 2011, respectively. The Company believes
it is more likely than not the deferred tax assets will be realized.
The following table discloses the income tax rates for the periods identified below:
For the year ended December 31,
2012
2011
Effective income tax rate
Statutory federal income tax rate.......
State and local income taxes .............
Effective income tax rate ...................
34%
4%
38%
34%
4%
38%
The following table discloses the Company’s deferred tax assets and liabilities as of December 31, 2012 and 2011, which are
included in other assets on the consolidated balance sheets:
2012
Assets
Liabilities
As of December 31,
2011
(dollars in thousands)
Assets
Liabilities
2010
Assets
Liabilities
Deferred taxes
Share based compensation ..
Other ...................................
Deferred taxes .....................
$
$
3,684 $
400
4,084 $
3,347 $
—
3,347 $
3,349 $
134
3,483 $
3,045 $
—
3,045 $
2,971 $
34
3,005 $
2,689
—
2,689
18. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
During the year ended December 31, 2012, the Company acquired 37 self-storage facilities for an aggregate purchase price of
approximately $432.3 million (see note 3).
The condensed consolidated pro forma financial information set forth below reflects adjustments to the Company’s historical
financial data to give effect to each of the acquisitions and related financing activity (including the issuance of common shares) that
occurred during 2012 and 2011 as if each had occurred as of January 1, 2011 and 2010, respectively. The unaudited pro forma
information presented below does not purport to represent what the Company’s actual results of operations would have been for the
periods indicated, nor does it purport to represent the Company’s future results of operations.
F-39
The following table summarizes, on a pro forma basis, the Company’s consolidated results of operations for the year ended
December 31, 2012 and 2011 based on the assumptions described above:
2012
2011
(unaudited)
(in thousands, except per share data)
Pro forma revenue .....................................................................................
Pro forma income (loss) from continuing operations ...............................
(Loss) earnings per common share from continuing
$
Basic and diluted — as reported ...........................................................
Basic and diluted — as pro forma .........................................................
$
304,564
22,248
$
286,882
(40,638)
(0.13) $
0.16
(0.12)
(0.42)
The following summarizes the amounts of revenue and earnings of the 2012 and 2011 acquisitions since the acquisition dates
included in the consolidated statements of operations for the years ended December 31, 2012 and 2011:
Total revenue .......................................
Net loss ................................................
$
Year ended December 31,
2011
2012
(in thousands)
56,093
(27,562)
$
10,007
(4,151)
19. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of quarterly financial information for the years ended December 31, 2012 and 2011 (in thousands,
except per share data):
March 31,
2012
June 30,
2012
September 30,
December 31,
2012
2012
Three months ended
Total revenues ........................................................
Total operating expenses ........................................
Net income (loss) attributable to the Company ......
Basic and diluted earnings (loss) per share ............
$
64,602 $
57,817
(3,843)
(0.04)
67,775 $
60,408
2,543
0.01
73,329 $
65,339
1,636
—
77,370
67,262
1,481
—
Total revenues .....................................................
Total operating expenses .....................................
Net income (loss) attributable to the Company ....
Basic and diluted earnings (loss) per share .........
$
53,228 $
44,202
(117)
0.00
54,989 $
45,028
902
0.01
57,700 $
44,686
6,828
0.07
61,328
51,362
(8,011)
(0.08)
March 31,
2011
June 30,
2011
September 30,
December 31,
2011
2011
Three months ended
The summation of quarterly earnings per share amounts do not necessarily equal the full year amounts. The above information was
updated to reclassify amounts to discontinued operations (see note 12).
20. SUBSEQUENT EVENTS
None
F-40
Description
Chandler, AZ
Glendale, AZ
Green Valley, AZ
Mesa I, AZ
Mesa II, AZ
Mesa III, AZ
Phoenix I, AZ
Phoenix II, AZ
Scottsdale, AZ
Tempe, AZ
Tucson I, AZ
Tucson II, AZ
Tucson III, AZ
Tucson IV, AZ
Tucson V, AZ
Tucson VI, AZ
Tucson VII, AZ
Tucson VIII, AZ
Tucson IX, AZ
Tucson X, AZ
Tucson XI, AZ
Tucson XII, AZ
Tucson XIII, AZ
Tucson XIV, AZ
Apple Valley I, CA
Apple Valley II, CA
Benicia, CA
Cathedral City, CA
Citrus Heights, CA
Diamond Bar, CA
Escondido, CA
Fallbrook, CA
Lancaster, CA
Long Beach, CA
Murrieta, CA
North Highlands, CA
Orangevale, CA
Palm Springs I, CA
Palm Springs II, CA
Pleasanton, CA
Rancho Cordova, CA
Rialto I, CA
Rialto II, CA
Riverside I, CA
Riverside II, CA
Roseville, CA
Sacramento I, CA
Sacramento II, CA
San Bernardino I, CA
San Bernardino II, CA
San Bernardino III, CA
San Bernardino IV, CA
San Bernardino V, CA
San Bernardino VII, CA
San Bernardino VIII, CA
San Marcos, CA
Santa Ana, CA
South Sacramento, CA
Spring Valley, CA
Temecula I, CA
Temecula II, CA
Thousand Palms, CA
Vista I, CA
Vista II, CA
Square Footage
47,520
56,807
25,050
52,375
45,361
58,189
100,775
83,309
79,525
53,890
59,350
43,950
49,832
48,040
45,184
40,766
52,688
46,600
67,720
46,350
42,700
42,225
45,792
49,095
73,290
61,405
74,770
110,974
75,620
102,984
142,670
46,620
60,675
125,091
49,835
57,244
50,317
72,675
122,550
85,045
53,978
57,391
99,803
67,120
85,166
59,869
50,714
61,888
31,070
41,546
35,341
83,166
57,001
78,729
95,029
37,430
63,896
52,165
55,045
81,550
84,398
74,305
74,405
148,081
CUBESMART
SCHEDULE III
REAL ESTATE AND RELATED DEPRECIATION
December 31, 2012
(Dollars in thousands)
Initial Cost
Gross Carrying Amount
at December 31, 2012
Encumb-
rances
Land
Building and
Improvements
Costs Subsequent to
Acquisition
Land
Building and
Improvements
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
201
298
920
731
706
1,134
756
443
749
188
188
532
674
515
440
670
589
724
424
439
671
587
707
140
160
2,392
2,194
327 1,257
2,265
1,153
2,739
2,176
2,101
3,376
2,251
4,879
2,159
2,078
2,078
2,048
2,595
1,980
1,692
2,576
2,265
2,786
1,633
1,689
2,582
2,258
2,721
1,570
1,787
7,028
10,046
(A) 1,633 4,793
7,404
11,804
1,492
2,247
14,368
5,532
2,546
4,175
7,164
9,758
2,799 8,222
3,212
4,118
3,098
6,183
5,359
3,767
3,380
4,128
572
1,251
1,093
5,391
3,583
6,753
7,741
2,288
5,600
2,319
5,394
4,735
5,839
1,493 6,835
4,076
13,599
1,094
899
277
1,351
1,170
1,284
1,152
1,406
51
112
98
1,872
783
1,475
1,691
775
1,223
790
1,178
660
3,080
2,522
3,040
133
390
3,138
1,883
868
1,423
1,565
2,131
711
4,629
(A)
(A)
(A)
(A)
(A)
(A)
(A)
418
298
921
731
706
1,135
847
883
749
384
391
533
675
515
440
670
589
725
425
439
672
587
708
476
431
2,392
2,195
991
127
145
174
163
296
1,401
1,688
175
941
1,009
167
179
236
164
222
174
344
181
377
259
216
450
1,540
1,211
125
283
262 327 1,290
2,934
1,070
2,413
1,904
1,858
3,023
2,957
5,920
2,030
2,755
2,802
1,855
2,353
1,860
1,549
2,387
2,088
2,614
1,505
1,777
2,428
2,112
2,637
2,566
2,505
6,080
8,033
207 1,634 4,259
6,461
9,592
2,719
2,681
12,848
4,796
2,373
3,746
6,306
8,728
15 2,799 6,993
2,933
3,718
3,984
5,540
4,941
3,487
3,051
3,682
1,398
1,876
1,649
4,756
3,493
6,243
6,059
2,031
5,059
2,150
5,157
5,485
5,053
422 1,493 6,241
5,407
11,683
229
169
1,682
189
316
303
219
203
1,142
1,152
1,035
82
436
236
261
107
232
227
507
1,185
143
1,095
899
672
1,351
1,170
1,284
1,152
1,407
182
306
242
1,872
783
1,290
1,692
776
1,223
791
1,178
899
3,080
150
142
1,726
934
391
129
273
232
104
326
2,524
3,040
432
556
3,138
1,903
868
1,423
1,566
2,132
2,259
115
1,118
4,629
F-41
Accumulated
Depreciation (F)
335
1,143
252
581
467
453
732
554
2,296
464
1,066
1,021
441
561
437
372
572
485
619
359
422
548
489
588
1,066
1,010
1,388
2,825
1,003
1,551
1,610
969
845
2,822
1,098
570
892
1,394
1,900
1,608
692
819
1,665
1,232
1,077
836
732
865
483
743
630
1,135
771
1,379
2,262
484
1,118
510
1,145
1,063
853
1,365
1,586
2,670
Total
1,617
3,352
1,368
3,334
2,635
2,564
4,158
3,804
6,803
2,779
3,139
3,193
2,388
3,028
2,375
1,989
3,057
2,677
3,339
1,930
2,216
3,100
2,699
3,345
3,042
2,936
8,472
10,228
5,893
8,985
12,632
3,151
3,237
15,986
6,699
3,241
5,169
7,872
10,860
9,792
4,028
4,617
4,656
6,891
6,111
4,771
4,203
5,089
1,580
2,182
1,891
6,628
4,276
7,533
7,751
2,807
6,282
2,941
6,335
6,384
8,133
7,734
6,525
16,312
Year Acquired
/ Developed
2005
1998
2005
2006
2006
2006
2006
2006/2011
1998
2005
1998
1998
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
1997
1997
2005
2006
2005
2005
2007
1997
2001
2006
2005
2005
2005
2006
2006
2005
2005
2006
1997
2006
2006
2005
2005
2005
1997
1997
1997
2005
2006
2006
2006
2005
2006
2005
2006
1998
2007
2006
2001
2005
Initial Cost
Gross Carrying Amount
at December 31, 2012
Description
Walnut, CA
West Sacramento, CA
Westminster, CA
Aurora, CO
Colorado Springs I, CO
Colorado Springs II, CO
Denver I, CO
Denver II, CO
Federal Heights, CO
Golden, CO
Littleton, CO
Northglenn, CO
Bloomfield, CT
Branford, CT
Bristol, CT
East Windsor, CT
Enfield, CT
Gales Ferry, CT
Manchester I, CT
Manchester II, CT
Milford, CT
Monroe, CT
Mystic, CT
Newington I, CT
Newington II, CT
Norwalk, CT
Old Saybrook I, CT
Old Saybrook II, CT
Shelton, CT
Stamford, CT
South Windsor, CT
Wilton, CT
Washington , DC
Washington , DC
Boca Raton, FL
Boynton Beach I, FL
Boynton Beach II, FL
Bradenton I, FL
Bradenton II, FL
Cape Coral, FL
Coconut Creek, FL
Dania Beach, FL
Dania, FL
Davie, FL
Deerfield Beach, FL
Delray Beach, FL
Fernandina Beach, FL
Ft. Lauderdale, FL
Ft. Myers, FL
Jacksonville I, FL
Jacksonville II, FL
Jacksonville III, FL
Jacksonville IV, FL
Jacksonville V, FL
Lake Worth, FL
Lakeland, FL
Kendall, FL
Lutz I, FL
Lutz II, FL
Margate I, FL
Margate II, FL
Merrit Island, FL
Miami I, FL
Miami II, FL
Miami III, FL
Miami IV, FL
Naples I, FL
Naples II, FL
Naples III, FL
Naples IV, FL
Encumb-
rances
(D)
(A)
1,784
(A)
(A)
(A)
(A)
13,060
(D)
(D)
Square Footage
50,708
40,040
68,098
75,867
47,925
62,300
59,200
74,520
54,770
87,382
53,490
52,102
48,700
50,679
47,725
46,016
52,875
54,230
47,025
52,725
44,885
58,700
50,725
42,620
36,140
31,239
86,950
26,425
78,465
28,957
72,125
84,475
63,085
82,530
37,958
61,749
61,703
68,391
87,960
76,627
78,783
168,217
58,270
80,985
57,230
67,813
110,995
70,063
67,510
80,296
65,270
65,580
77,425
81,835
161,808
49,111
75,395
66,795
69,232
54,165
65,186
50,417
46,825
67,010
150,735
76,352
48,150
65,850
80,266
40,600
Land
1,578
1,222
1,740
1,343
771
657
673
1,430
878
1,683
1,268
862
78
217
1,819
744
424
240
540
996
87
2,004
136
1,059
911
646
3,092
1,135
1,449
1,941
90
2,409
871
3,152
529
667
1,030
1,180
1,931
472
1,189
3,584
205
1,268
Building and
Improvements
4,635
3,590
5,142
2,986
1,717
2,674
2,741
7,053
1,953
3,744
2,820
1,917
880
2,433
3,161
1,294
2,424
2,697
3,096
1,730
1,050
3,483
1,645
1,840
1,584
3,187
5,374
1,973
8,221
3,374
1,127
12,261
12,759
13,612
3,054
3,796
2,968
3,324
5,561
2,769
5,863
10,324
2,068
7,183
946 2,999
4,539
4,222
3,646
3,329
5,362
950 7,004
7,409
870 8,049
8,210
6,597
896
8,106
901 2,478
992 2,868
1,763
1,473
2,983
1,999
2,544
13,185
10,494
1,010
1,652
1,561
2,980
161
132
716
179
253
4,577
1,852
90
148
139
262
798
378
937
303
1,862
1,220
183
81
2,350
860
Costs Subsequent to
Acquisition
Land
Building and
Improvements
Total
148
143
277
271
282
201
184
1
232
351
164
353
2,263
1,214
75
418
384
1,413
341
210
1,085
557
1,799
154
226
1
429
213
173
73
1,095
63
388
71
1,488
1,646
257
199
731
2,476
3
1,049
1,373
759
1,595
1,222
1,743
1,343
771
656
674
1,430
879
1,684
1,268
862
360
504
1,819
744
473
489
563
996
274
2,004
410
1,059
911
646
3,092
1,135
1,449
1,941
272
2,421
894
3,154
813
958
1,030
1,180
1,931
830
1,189
3,584
481
1,373
4,044
3,184
4,535
2,723
1,657
2,388
2,432
7,053
1,791
3,425
2,476
1,857
2,571
2,863
2,772
1,441
2,216
3,437
2,664
1,633
1,665
3,356
2,720
1,700
1,536
3,188
4,950
1,858
7,311
2,911
1,811
12,384
10,465
11,909
3,635
4,352
2,790
3,003
5,197
4,311
5,866
9,876
2,745
5,678
1,983 1,311 4,492
4,184
6,911
5,407
3,398
4,725
40 950 5,488
5,971
1,007 1,651 6,981
6,766
11,573
1,319
6,493
166 901 2,258
229 992 2,587
2,933
2,671
2,780
3,054
3,151
11,951
9,782
3,079
5,209
4,294
3,277
399
383
796
484
561
4,577
1,963
270
558
598
407
1,814
1,787
533
1,738
1,423
589
848
2,443
4,247
4,039
544
883
643
1,384
328
1,862
646
3,563
2,396
688
45
1,220
183
256
2,350
265
6,929
998
160
1,670
963
5,639
4,406
6,278
4,066
2,428
3,044
3,106
8,483
2,670
5,109
3,744
2,719
2,931
3,367
4,591
2,185
2,689
3,926
3,227
2,629
1,939
5,360
3,130
2,759
2,447
3,834
8,042
2,993
8,760
4,852
2,083
14,805
11,359
15,063
4,448
5,310
3,820
4,183
7,128
5,141
7,055
13,460
3,226
7,051
5,803
5,067
7,554
6,791
3,726
6,587
6,438
7,641
8,632
7,986
11,756
1,575
8,843
3,159
3,579
3,332
3,054
3,576
3,538
3,712
16,528
11,745
3,349
5,767
4,892
3,684
Accumulated
Depreciation (F)
934
726
1,099
624
376
515
574
56
396
773
556
394
935
1,501
730
374
787
1,373
1,000
420
755
914
1,268
440
391
42
1,312
501
315
766
780
326
1,618
378
1,124
1,366
663
736
1,284
1,591
47
2,412
1,269
2,297
1,468
1,379
2,160
1,800
1,268
1,010
924
1,000
1,170
1,129
4,218
749
1,083
549
632
1,279
1,102
782
1,597
1,513
2,599
539
1,243
1,978
1,918
1,334
Year Acquired
/ Developed
2005
2005
2005
2005
2005
2006
2006
2012
2005
2005
2005
2005
1997
1995
2005
2005
2001
1995
2002
2005
1996
2005
1996
2005
2005
2012
2005
2005
2011
2005
1996
2012
2008
2011
2001
2001
2005
2004
2004
2000
2012
2004
1996
2002
1998
2001
1996
1999
1999
2005
2007
2007
2007
2007
1998
1994
2007
2004
2004
1996
1996
2002
1996
1996
2005
2011
1996
1997
1997
1998
F-42
Initial Cost
Gross Carrying Amount
at December 31, 2012
Encumb-
rances
-
Description
Ocoee, FL
Orange City, FL
Orlando II, FL
Orlando III, FL
Orlando IV, FL
Orlando V, FL
Oviedo, FL
Pembroke Pines, FL
Royal Palm Beach II, FL
Sanford, FL
Sarasota, FL
St. Augustine, FL
Stuart, FL
SW Ranches, FL
Tampa, FL
West Palm Beach I, FL
West Palm Beach II, FL
West Palm Beach III, FL
Alpharetta, GA
Atlanta, GA
Austell , GA
Decatur, GA
Duluth I, GA
Duluth II, GA
Lawrenceville, GA
Leisure City, GA
Norcross I, GA
Norcross II, GA
Norcross III, GA
Norcross, GA
Peachtree City I, GA
Peachtree City II, GA
Smyrna, GA
Snellville, GA
Suwanee I, GA
Suwanee II, GA
Addison, IL
Aurora, IL
Bartlett, IL
Hanover, IL
Bellwood, IL
Des Plaines, IL
Elk Grove Village, IL
Glenview, IL
Gurnee, IL
Harvey, IL
Joliet, IL
Kildeer, IL
Lombard, IL
Mount Prospect, IL
Mundelein, IL
North Chicago, IL
Plainfield I, IL
Plainfield II, IL
Schaumburg, IL
Streamwood, IL
Warrensville, IL
Waukegan, IL
West Chicago, IL
Westmont, IL
Wheeling I, IL
Wheeling II, IL
Woodridge, IL
Indianapolis, IN
Boston I, MA
Boston II, MA
Leominster, MA
Medford, MA
Baltimore, MD
California, MD
District Heights, MD
Square Footage
76,250
59,586
63,084
102,705
76,565
75,359
49,251
67,321
81,405
61,810
71,402
59,725
87,037
64,955
83,738
68,051
94,503
85,460
90,485
66,675
83,875
145,280
70,985
47,242
73,765
56,177
85,420
47,270
57,555
52,020
49,875
57,100
57,015
80,000
85,240
79,590
31,325
74,435
51,425
41,190
86,650
74,400
64,129
100,115
80,300
60,090
72,765
46,285
57,764
65,000
44,700
53,350
53,900
51,900
31,160
64,305
48,796
79,500
48,175
53,450
54,210
67,825
50,262
73,014
33,286
60,545
53,823
58,765
93,350
77,865
78,660
Land
1,286
1,191
1,589
1,209
633
950
337
1,640
453
333
135
324
1,390
2,670
719
2,129
804
806
822
1,635
616
373
681
546
409
514
938
576
366
435
398
750
1,660
1,737
800
428
644
931
1,126
1,012
1,564
1,446
3,740
1,521
869
547
2,102
1,305
1,701
1,498
1,073
1,770
694
Building and
Improvements
3,705
3,209
4,576
7,768
3,587
4,685
440 2,824
3,772
8,607
2,911
3,656
1,515
3,625
7,598
6,249
3,420
8,671
3,962
4,720
4,053
4,711
6,776
2,044
3,355
2,903
2,018
2,930
4,625
2,839
2,025
2,532
1,963
4,271
4,781
5,010
6,942
3,531
3,652
2,493
2,197
5,768
4,327
3,535
10,367
5,440
3,635
4,704
2,187
3,938
3,114
2,782
3,006
1,715
2,000
538 645
1,662
3,072
4,363
2,249
3,873
3,213
3,816
3,397
406 3,496
3,048
8,628
1,519
7,165
5,997
4,280
8,313
1,447
1,066
1,198
1,071
1,155
857
793
943
538
1,516
90
1,330
1,050
1,486
1,527
Costs Subsequent to
Acquisition
Land
Building and
Improvements
Total
85
125
135
454
92
1
1,286
1,191
1,589
1,209
633
950
953
1,640
453
529
383
685
1,390
2,670
835
2,129
804
967
822
1,643
616
373
681
546
409
632
938
576
366
529
398
750
1,660
1,737
622
428
644
931
1,126
1,012
1,564
1,446
3,740
1,521
869
547
1,997
1,305
1,701
1,498
1,073
1,740
694
3,273
2,846
4,072
6,836
3,175
4,685
500 440 2,657
5,274
7,102
2,505
4,106
4,264
5,568
5,861
4,958
3,953
7,299
3,962
4,070
4,055
4,196
6,808
1,877
3,408
2,787
2,020
2,935
4,659
2,841
1,870
2,487
1,966
3,444
4,371
4,501
5,764
3,312
3,278
2,330
2,059
5,239
4,062
3,258
9,242
4,931
3,263
4,238
2,170
3,975
2,943
2,537
2,831
1,628
1,799
538 668
1,645
2,788
4,022
2,139
3,480
3,009
3,631
3,089
214 406 3,204
2,700
7,099
3,486
5,777
5,818
3,842
7,535
2,645
156
131
1,238
3,309
2,846
126
76
1,508
260
1
949
1
140
188
157
53
300
3
735
33
1
129
584
3
203
250
186
26
281
146
219
202
769
375
251
340
254
167
193
184
637
281
167
310
206
132
159
294
148
312
248
147
269
366
168
1,447
1,066
1,198
1,071
1,155
857
793
943
538
1,516
338
1,330
1,173
1,486
1,527
75
307
2,402
90
1,244
154
347
4,559
4,037
5,661
8,045
3,808
5,635
3,097
6,227
8,742
2,958
4,635
4,647
6,253
7,251
7,628
4,788
9,428
4,766
5,037
4,877
5,839
7,424
2,250
4,089
3,333
2,429
3,567
5,597
3,417
2,236
3,016
2,364
4,194
6,031
6,238
6,386
3,740
3,922
3,261
3,185
6,251
5,626
4,704
12,982
6,452
4,132
4,785
4,167
5,280
4,644
4,035
3,904
3,368
2,493
1,206
3,092
3,854
5,220
3,210
4,635
3,866
4,424
4,032
3,610
3,238
8,615
3,824
7,107
6,991
5,328
9,062
Accumulated
Depreciation (F)
752
706
933
1,271
208
12
503
2,976
1,192
463
1,499
1,687
2,276
981
837
1,292
1,863
10
1,182
43
812
2,841
88
99
129
21
1,089
123
30
87
753
21
1,010
765
806
965
800
792
556
497
1,616
981
816
2,238
1,220
794
1,029
491
992
704
614
693
387
406
155
398
635
977
517
837
735
884
749
778
184
2,142
1,498
971
1,885
929
319
Year Acquired
/ Developed
2005
2004
2005
2006
2010
2012
2006
1997
2007
2006
1999
1996
1997
2007
2007
2001
2004
2012
2001
2012
2006
1998
2011
2012
2011
2012
2001
2012
2012
2011
2001
2012
2001
2007
2007
2007
2004
2004
2004
2004
2001
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2005
2004
2004
2005
2004
2004
2004
2004
2004
2004
2004
2010
2002
1998
2007
2001
2004
2011
F-43
Initial Cost
Gross Carrying Amount
at December 31, 2012
Description
Gaithersburg, MD
Laurel, MD
Temple Hills, MD
Belmont, NC
Bordentown, NJ
Burlington I, NC
Burlington II, NC
Cary, NC
Charlotte, NC
Raleigh, NC
Brick, NJ
Cherry Hill I, NJ
Cherry Hill II, NJ
Clifton, NJ
Cranford, NJ
East Hanover, NJ
Egg Harbor I, NJ
Egg Harbor II, NJ
Elizabeth, NJ
Fairview, NJ
Freehold, NJ
Hamilton, NJ
Hoboken, NJ
Linden, NJ
Lumberton, NJ
Morris Township, NJ
Parsippany, NJ
Randolph, NJ
Sewell, NJ
Somerset, NJ
Albuquerque I, NM
Albuquerque II, NM
Albuquerque III, NM
Las Vegas I, NV
Las Vegas II, NV
Bronx I, NY
Bronx II, NY
Bronx III, NY
Bronx IV, NY
Bronx V, NY
Bronx VI, NY
Bronx VII, NY
Bronx VIII, NY
Bronx IX, NY
Bronx X, NY
Brooklyn I, NY
Brooklyn II, NY
Brooklyn III, NY
Brooklyn IV, NY
Brooklyn V, NY
Brooklyn VI, NY
Brooklyn VII, NY
Jamaica I, NY
Jamaica II, NY
New Rochelle I, NY
New Rochelle II, NY
North Babylon, NY
Riverhead, NY
Southold, NY
Tuckahoe, NY
West Hempstead, NY
White Plains, NY
Woodhaven, NY
Wyckoff, NY
Yorktown, NY
Cleveland I, OH
Cleveland II, OH
Columbus , OH
Grove City, OH
Hilliard, OH
Lakewood, OH
Encumb-
rances
(A)
(A)
(A)
9,102
3,195
24,503
29,141
8,974
Square Footage
87,045
162,792
97,200
81,600
50,600
109,396
42,305
112,086
69,000
48,675
51,725
52,600
65,050
105,550
91,250
107,679
36,025
70,425
38,830
27,875
81,495
70,550
34,200
100,425
96,025
71,776
66,325
52,465
57,830
57,585
65,927
58,598
57,536
48,596
48,850
68,813
90,270
106,065
75,580
54,683
39,495
78,575
30,550
148,470
159,830
57,020
60,945
41,625
37,467
46,945
74,415
72,710
88,415
91,325
48,434
63,295
78,188
38,340
59,745
51,688
85,281
87,705
50,665
61,960
78,615
46,050
58,425
71,905
89,290
89,690
39,287
Land
3,124
1,409
1,541
385
457
498
320
543
782
209
234
222
471
4,346
290
504
104
284
751
246
1,086
1,885
1,370
517
987
Building and
Improvements
9,000
8,035
8,788
2,196
2,255
2,837
1,829
3,097
4,429
2,398
2,762
1,260
2,323
12,520
3,493
5,763
510
1,608
2,164
2,759
5,355
5,430
3,947
6,008
4,864
500 5,602
475 5,322
4,872
2,766
6,129
3,395
3,801
2,171
2,986
5,411
11,411
31,561
33,999
22,830
17,564
15,095
22,512
6,137
39,279
44,816
10,172
9,073
15,657
12,252
10,814
19,680
28,498
11,658
26,930
4,827
2,713
2,514
1,149
2,238
13,236
11,030
18,049
11,285
11,113
13,338
2,592
1,427
3,151
4,485
3,476
854
855
484
1,243
1,039
1,163
664
1,851
3,354
2,014
-
6,017
-
-
-
-
1,245
7,967
9,090
1,795
1,601
3,195
2,500
2,207
4,016
5,816
2,043
5,496
1,673
3,167
225
1,068
2,079
1,516
2,237
3,295
2,028
1,961
2,710
525
290
1,234
1,756
1,361
405
Costs Subsequent to
Acquisition
Land
Building and
Improvements
Total
3,124
1,928
1,800
451
457
498
340
543
1,068
296
485
222
471
4,340
779
1,315
104
284
751
246
1,086
1,893
1,370
1,043
987
383
3,571
2,209
691
2
457
325
476
1,427
303
1,396
73
1
168
2,258
3,865
23
162
326
417
6
217
579
2,050
1
8,123
9,502
9,151
2,207
2,257
2,661
1,722
3,301
4,661
2,496
3,369
1,151
2,324
11,009
4,587
7,710
522
1,550
2,081
2,611
5,361
4,915
3,935
6,587
4,866
2,623 1,072 6,691
1,953 844 5,992
4,825
3,207
6,129
3,067
3,417
2,091
2,941
5,120
10,273
31,109
29,736
20,258
15,565
13,107
22,668
6,185
39,413
44,956
8,934
8,168
15,774
12,401
10,904
19,834
28,737
10,553
27,129
4,443
18,713
5,852
1,083
2,044
7,586
11,030
16,373
10,031
9,737
13,395
2,325
1,338
2,710
3,992
3,137
1,245
1,108
706
1,243
1,039
1,163
664
1,851
3,355
2,014
-
6,017
-
-
-
-
1,251
7,967
9,090
1,795
1,601
3,195
2,500
2,207
4,016
5,816
2,043
5,496
1,673
3,762
568
1,068
2,079
1,516
2,237
3,295
2,028
1,961
2,710
524
289
1,239
1,761
1,366
405
1,287
1,292
1
256
239
308
366
290
454
82
84
82
112
44
46
18
136
140
179
393
35
87
35
47
75
1,519
56
265
167
4,042
167
210
121
1
815
43
106
44
101
162
35
125
148
505
11,247
11,430
10,951
2,658
2,714
3,159
2,062
3,844
5,729
2,792
3,854
1,373
2,795
15,349
5,366
9,025
626
1,834
2,832
2,857
6,447
6,808
5,305
7,630
5,853
7,763
6,836
5,933
3,913
7,372
4,106
4,580
2,755
4,792
8,475
12,287
31,109
35,753
20,258
15,565
13,107
22,668
7,436
47,380
54,046
10,729
9,769
18,969
14,901
13,111
23,850
34,553
12,596
32,625
6,116
22,475
6,420
2,151
4,123
9,102
13,267
19,668
12,059
11,698
16,105
2,849
1,627
3,949
5,753
4,503
1,650
Accumulated
Depreciation (F)
1,938
2,923
3,396
694
24
888
536
1,177
1,301
993
1,621
77
6
2,480
2,105
3,653
36
109
496
1,355
43
938
928
3,399
52
4,367
2,871
1,529
996
49
744
831
496
728
1,271
738
936
1,230
694
568
590
598
163
864
602
636
566
447
387
453
790
990
3,544
964
992
445
2,220
285
557
540
88
863
364
619
389
590
334
596
846
668
806
Year Acquired
/ Developed
2005
2001
2001
2001
2012
2001
2001
2001
2002
1998
1996
2010
2012
2005
1996
1996
2010
2010
2005
1997
2012
2006
2005
1996
2012
1997
1997
2002
2001
2012
2005
2005
2005
2006
2006
2010
2011
2011
2011
2011
2011
2012
2012
2012
2012
2010
2010
2011
2011
2011
2011
2011
2001
2011
2005
2012
1998
2005
2005
2011
2012
2011
2011
2010
2011
2005
2005
2006
2006
2006
1989
F-44
Initial Cost
Gross Carrying Amount
at December 31, 2012
Description
Marblehead, OH
Middleburg Heights, OH
North Olmsted I, OH
North Olmsted II, OH
North Randall, OH
Reynoldsburg, OH
Strongsville, OH
Warrensville Heights, OH
Westlake, OH
Conshohocken, PA
Exton, PA
Langhorne, PA
Levittown, PA
Montgomeryville, PA
Norristown, PA
Philadelphia, PA
Alcoa, TN
Antioch, TN
Cordova I, TN
Cordova II, TN
Knoxville I, TN
Knoxville II, TN
Knoxville III, TN
Knoxville V, TN
Knoxville VI, TN
Knoxville VII, TN
Knoxville VIII, TN
Memphis I, TN
Memphis II, TN
Memphis III, TN
Memphis IV, TN
Memphis V, TN
Memphis VI, TN
Memphis VII, TN
Memphis VIII, TN
Nashville I, TN
Nashville II, TN
Nashville III, TN
Nashville IV, TN
Allen, TX
Austin I, TX
Austin II, TX
Austin III, TX
Baytown, TX
Bryan, TX
Carrollton, TX
College Station, TX
Cypress, TX
Dallas, TX
Denton, TX
El Paso I, TX
El Paso II, TX
El Paso III, TX
El Paso IV, TX
El Paso V, TX
El Paso VI, TX
El Paso VII, TX
Fort Worth I, TX
Fort Worth II, TX
Frisco I, TX
Frisco II, TX
Frisco III, TX
Frisco IV, TX
Garland I, TX
Garland II, TX
Greenville I, TX
Greenville II, TX
Houston I, TX
Houston II, TX
Houston III, TX
Houston IV, TX
Square Footage
52,300
92,725
48,665
47,850
80,229
66,895
43,507
90,281
62,750
81,435
57,650
65,150
76,180
84,145
52,031
97,289
42,350
76,160
54,125
67,700
29,337
37,900
45,736
42,790
63,440
55,594
95,868
92,320
71,710
40,507
38,678
60,120
108,996
96,163
96,060
103,910
83,484
101,575
102,450
62,490
59,520
65,241
70,560
38,950
60,450
77,420
26,559
58,141
59,324
60,836
59,952
48,704
71,252
67,058
62,290
36,620
34,545
50,621
72,900
50,854
70,999
74,815
74,835
70,100
68,425
59,385
44,900
100,730
71,300
60,820
43,975
Encumb-
rances
(C)
(C)
(C)
(C)
3,725
(D)
(B)
1,862
(A)
(A)
(A)
(A)
3,001
2,962
461
(B)
Land
374
63
63
290
515
1,290
570
525
509
1,726
541
1,019
926
975
777
1,461
254
588
296
429
99
117
182
134
439
312
585
677
395
Building and
Improvements
1,843
704
704
1,129
2,323
3,295
3,486
766
2,508
8,508
2,668
5,023
5,296
4,809
3,709
8,334
2,113
4,906
2,482
3,580
1,113
1,308
2,053
1,493
3,653
2,594
4,869
3,880
2,276
212 1,779
1,342
1,753
3,851
1,792
2,959
3,379
4,950
3,469
8,274
3,519
2,038
3,894
5,468
863
1,268
3,261
740
1,773
2,253
2,936
1,805
1,201
2,192
1,888
1,617
607
517
1,141
4,607
3,148
4,507
6,088
4,072
751 3,984
4,578
1,682
1,217
1,296
1,377
524
875
160
209
462
215
355
405
593
416
992
714
2,239
734
1,030
946
1,394
661
812
360
2,475
553
1,983
1,319
2,408
2,073
1,758
660
563
1,253
868
1,093
1,564
1,147
719
862
1,848
1,337
1,420
1,510
575
960
Costs Subsequent to
Acquisition
Land
Building and
Improvements
Total
373
332
214
469
898
1,295
570
935
508
1,726
541
1,019
926
975
777
1,461
254
588
297
429
102
129
331
235
440
312
586
677
395
214
2,124
1,298
1,103
2,928
214
303
2,863
184
7
1
1
1,124
10
441
1,639
111
240
235
284
250
321
829
450
100
155
256
1,397
463
1,783
2,241
1,565
1,969
4,103
3,055
2,956
2,977
2,304
8,515
2,669
5,024
5,407
4,818
4,254
6,794
1,891
4,379
2,307
3,323
1,146
1,418
2,619
1,762
3,213
2,340
4,378
4,264
2,061
189 213 1,640
1,279
1,970
3,561
1,682
2,768
3,230
4,413
3,263
7,350
3,520
1,839
3,543
4,905
913
1,172
3,262
700
1,776
2,124
2,644
1,695
1,141
2,012
1,587
1,483
616
531
1,035
4,203
2,793
3,982
5,511
3,618
377 767 3,774
4,176
1,484
1,080
1,319
1,159
682
886
160
210
462
215
355
405
593
416
992
714
2,410
738
1,035
948
1,396
661
813
360
2,475
569
1,984
1,320
2,409
2,074
1,761
662
565
1,253
874
1,093
1,564
1,154
719
222
591
304
506
308
423
172
141
316
1
132
210
137
282
125
1
109
2
318
184
219
158
152
12
126
143
124
128
263
84
86
228
104
862
1,848
1,337
1,422
1,512
576
961
195
90
84
266
51
270
205
2,156
2,573
1,779
2,438
5,001
4,350
3,526
3,912
2,812
10,241
3,210
6,043
6,333
5,793
5,031
8,255
2,145
4,967
2,604
3,752
1,248
1,547
2,950
1,997
3,653
2,652
4,964
4,941
2,456
1,853
1,439
2,180
4,023
1,897
3,123
3,635
5,006
3,679
8,342
4,234
4,249
4,281
5,940
1,861
2,568
3,923
1,513
2,136
4,599
3,213
3,679
2,461
4,421
3,661
3,244
1,278
1,096
2,288
5,077
3,886
5,546
6,665
4,337
4,541
5,038
3,332
2,417
2,741
2,671
1,258
1,847
Accumulated
Depreciation (F)
455
933
734
1,246
1,577
656
494
1,131
581
68
7
40
1,787
38
108
2,346
451
984
546
717
518
596
983
839
769
561
1,039
1,299
654
396
309
472
778
446
597
742
1,014
721
1,627
47
420
742
977
200
276
-
154
23
464
511
391
266
472
437
347
141
4
235
867
635
912
1,137
254
760
778
333
243
300
305
160
201
Year Acquired
/ Developed
2005
1980
1979
1988
1998
2006
2007
1996
2005
2012
2012
2012
2001
2012
2011
2001
2005
2005
2005
2006
1997
1997
1998
1998
2005
2005
2005
2001
2001
2005
2005
2005
2006
2006
2006
2005
2005
2006
2006
2012
2005
2006
2006
2005
2005
2012
2005
2012
2005
2006
2005
2005
2005
2005
2005
2005
2005
2005
2006
2005
2005
2006
2010
2006
2006
2005
2005
2005
2005
2005
2005
F-45
Initial Cost
Gross Carrying Amount
at December 31, 2012
Costs Subsequent to
Acquisition
Land
Building and
Improvements
Total
Description
Houston V, TX
Houston VI, TX
Houston VII, TX
Houston VIII, TX
Keller, TX
La Porte, TX
Lewisville, TX
Mansfield I, TX
Mansfield II, TX
McKinney I, TX
McKinney II, TX
North Richland Hills, TX
Pearland, TX
Roanoke, TX
San Antonio I, TX
San Antonio II, TX
San Antonio III, TX
Sherman I, TX
Sherman II, TX
Spring, TX
Murray I, UT
Murray II, UT
Salt Lake City I, UT
Salt Lake City II, UT
Alexandria, VA
Burke Lake, VA
Fairfax, VA
Fredericksburg I, VA
Fredericksburg II, VA
Leesburg, VA
McLearen, VA
Mannasas, VA
Vienna, VA
Milwaukee, WI
Corporate Office
USIFB
Encum-
brances
3,846
2,276
1,692
3,928
-
(A)
(A)
(A)
(A)
9,603
7,325
(E)
(E)
4,721
Square Footage
126,180
54,680
54,882
53,630
61,885
44,850
58,140
63,075
58,400
47,020
70,050
57,200
72,249
59,500
73,305
73,230
71,775
54,975
48,425
72,751
60,280
71,221
56,446
51,676
114,650
90,927
73,650
69,475
61,207
85,503
69,240
73,045
54,318
58,500
25,485,304
Land
1,153
575
1,294
296
890
842
476
837
662
1,632
855
2,252
450
1,337
2,895
1,047
996
1,904
1,337
580
1,156
983
1,294
296
890
843
492
843
662
1,634
857
2,252
450
1,337
2,895
1,052
996
1,906
1,337
580
474
5,690
1
3
111
391
284
115
5
122
139
113
1
101
248
122
213
99
131
102
Building and
Improvements
6,122
524
6,377
1,459
4,727
761
2,525
4,443
3,261
1,486
5,076
2,049
2,216
1,217
2,635
5,558
5,286
1,733
1,217
3,081
5,735
4,893
6,379
1,461
4,253
867
2,395
3,981
3,266
1,370
4,591
1,798
2,218
1,119
2,352
4,986
4,778
1,541
1,114
2,735
3,847 1,017 366 3,848 1,169
757
838
730
13,877
10,360
11,229
4,423
4,659
8,656
7,354
4,260
11,347
3,918
1,651
12,117
1,828,388
2,148
2,696
1,931
2,812
2,093
2,276
1,680
1,758
1,746
1,482
860
2,302
374
-
-
462,626
349
303
347
12
1,016
9
256
289
50
109
51
6
205
1,651
12,117
219,849
567
712
548
13,865
10,940
11,220
4,840
5,062
9,894
8,400
4,872
11,340
4,333
2,147
2,695
2,074
2,812
2,093
2,276
1,680
1,757
1,746
1,482
860
2,300
375
1,846,769
440,812
Year Acquired /
Developed
2006
2011
2012
2012
2006
2005
2006
2006
2012
2005
2006
2005
2012
2005
2005
2006
2007
2005
2005
2006
2005
2005
2005
2005
2012
2011
2012
2005
2005
2011
2010
2010
2012
2004
Accumulated
Depreciation (F)
1,085
246
84
19
888
197
466
826
61
306
951
405
29
246
515
940
865
343
245
574
275
225
201
162
184
630
89
918
980
297
467
293
90
956
737
1,247
328,933
6,891
5,876
7,673
1,757
5,143
1,710
2,887
4,824
3,928
3,004
5,448
4,050
2,668
2,456
5,247
6,038
5,774
3,447
2,451
3,315
5,017
2,905
3,534
2,661
16,689
12,453
13,505
6,103
6,417
10,402
8,836
5,120
13,649
4,292
1,651
12,117
2,291,014
(A) This facility is part of the YSI 20 Loan portfolio, with a balance of $58,524 as of December 31, 2012.
(B) This facility is part of the YSI 28 Loan portfolio, with a balance of $1,460 as of December 31, 2012.
(C) This facility is part of the YSI 30 Loan portfolio, with a balance of $6,765 as of December 31, 2012.
(D) This facility is part of the YSI 33 Loan portfolio, with a balance of $10,930 as of December 31, 2012.
(E) This facility is part of the YSI 35 Loan portfolio, with a balance of $4,373 as of December 31, 2012.
(F) Depreciation on the buildings and improvements is recorded on a straight-line basis over their estimated useful lives, which range from five to 39 years.
The aggregate cost for Federal income tax purposes was approximately $2.3 billion and $2.0 billion at December 31, 2012 and 2011,
respectively.
F-46
Activity in real estate facilities during 2012, 2011, and 2010 was as follows (in thousands):
Storage facilities*
Balance at beginning of year ............................................
Acquisitions & improvements .........................................
Fully depreciated assets ...................................................
Real estate venture ...........................................................
Dispositions and other ......................................................
Construction in progress ..................................................
Balance at end of year ......................................................
Accumulated depreciation*
Balance at beginning of year ............................................
Depreciation expense .......................................................
Fully depreciated assets ...................................................
Dispositions and other ......................................................
Balance at end of year ......................................................
Net Storage facility assets ................................................
2012
2011
2010
$
$
$
$
$
2,107,469
335,644
(25,415)
93,679
(71,265)
2,910
2,443,022
318,749
79,955
(25,415)
(19,974)
353,315
2,089,707
$
$
$
$
$
1,743,021
460,357
(43,770)
—
(56,458)
4,319
2,107,469
314,530
58,560
(43,770)
(10,571)
318,749
1,788,720
$
$
$
$
$
1,774,542
96,612
(79,211)
—
(49,865)
943
1,743,021
344,009
64,387
(79,211)
(14,655)
314,530
1,428,491
* These amounts include equipment that is housed at the Company’s storage facilities.
F-47
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Dean Jernigan, certify that:
1. I have reviewed this Annual Report on Form 10-K of CubeSmart;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Trustees (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 28, 2013
/s/ Dean Jernigan
Dean Jernigan
Chief Executive Officer
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Timothy M. Martin, certify that:
1. I have reviewed this Annual Report on Form 10-K of CubeSmart;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Trustees (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 28, 2013
/s/ Timothy M. Martin
Timothy M. Martin
Chief Financial Officer
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.3
I, Dean Jernigan, certify that:
1. I have reviewed this Annual Report on Form 10-K of CubeSmart L.P.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Trustees (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 28, 2013
/s/ Dean Jernigan
Dean Jernigan
Chief Executive Officer
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.4
I, Timothy M. Martin, certify that:
1. I have reviewed this Annual Report on Form 10-K of CubeSmart L.P.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Trustees (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 28, 2013
/s/ Timothy M. Martin
Timothy M. Martin
Chief Financial Officer
Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
the
Sarbanes-Oxley Act of 2002
Exhibit 32.1
The undersigned, the Chief Executive Officer and Chief Financial Officer of CubeSmart (the “Company”), each hereby certifies,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(a) The Annual Report on Form 10-K of the Company for the year ended December 31, 2012 (the “Report”) filed on the date
hereof with the Securities and Exchange Commission fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended; and
(b) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: February 28, 2013
Date: February 28, 2013
/s/ Dean Jernigan
Dean Jernigan
Chief Executive Officer
/s/ Timothy M. Martin
Timothy M. Martin
Chief Financial Officer
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff upon request.
Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
the
Sarbanes-Oxley Act of 2002
Exhibit 32.2
The undersigned, the Chief Executive Officer and Chief Financial Officer of CubeSmart L.P. (the “Company”), each hereby
certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(a) The Annual Report on Form 10-K of the Company for the year ended December 31, 2012 (the “Report”) filed on the date
hereof with the Securities and Exchange Commission fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended; and
(b) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: February 28, 2013
Date: February 28, 2013
/s/ Dean Jernigan
Dean Jernigan
Chief Executive Officer
/s/ Timothy M. Martin
Timothy M. Martin
Chief Financial Officer
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff upon request.
BOARD OF TRUSTEES
EXECUTIVE OFFICERS
CORPORATE INFORMATION
Dean Jernigan
Chief Executive Officer
Transfer Agent
Investor Relations
American Stock Transfer &
460 East Swedesford Road
Christopher P. Marr
President, Chief Operating Officer
and Chief Investment Officer
Timothy M. Martin
Chief Financial Officer
Jeffrey P. Foster
Senior Vice President,
Chief Legal Officer and Secretary
Trust Co., LLC
Operations Center
6201 15th Avenue
Brooklyn, NY 11219
877.237.6885
Stock Listing
Suite 3000
Wayne, PA 19087
610.293.5700
Form 10-K
The Annual Report on Form
10-K filed with the Securities
CubeSmart trades on the
and Exchange Commission
New York Stock Exchange
is available to shareholders
under the symbol CUBE
without charge upon written
Annual Meeting
request to:
Investor Relations
The annual meeting of
460 East Swedesford Road
shareholders will be held at:
Suite 3000
Four Seasons Hotel
One Logan Square
Philadelphia, PA 19103
on May 29, 2013 at
Wayne, PA 19087
610.293.5700
Internet
8:00 a.m. Eastern Daylight Time
Financial statements and
other information are
Corporate Headquarters
available electronically on
460 East Swedesford Road
CubeSmart’s web site at
Suite 3000
Wayne, PA 19087
www.cubesmart.com
William M. Diefenderfer III
Chairman of the Board
Partner, Diefenderfer, Hoover,
Boyle & Wood
Dean Jernigan
Chief Executive Officer
Piero Bussani
General Counsel and
Executive Vice-President,
WHM, LLC
Marianne M. Keler
Partner, Keler-Kershow, PLLC
David J. LaRue
President and
Chief Executive Officer,
Forest City Enterprises, Inc.
John F. Remondi
President and
Chief Operating Officer,
SLM Corporation
Jeffrey F. Rogatz
Managing Director,
Robert W. Baird & Co.
John W. Fain
Senior Vice President,
Sales & Marketing (retired)
UPS Freight
CubeSmart submitted to the New York Stock Exchange the certification of the Chief Executive Officer certifying that he is not aware of any violation of the New York Stock
Exchange corporate governance listing standards in effect at the time of the submission of such certificate.
In addition, we have filed, as exhibits 31.1, 31.2, 31.3 and 31.4 to the Annual Report on Form 10-K for the year ended December 31, 2012, the certifications of the Chief
Executive Officer and Chief Financial Officer, respectively, required by Section 302 of the Sarbanes-Oxley Act of 2002 regarding the quality of CubeSmart and CubeSmart L.P.’s
public disclosure.
Forward-looking Statements
This Annual Report contains certain forward-looking statements within the meaning of the Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Such statements are based on assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties and other factors, many of
which cannot be predicted with accuracy and some of which might not even be anticipated. Although we believe the expectations reflected in these forward-looking statements
are based on reasonable assumptions, future events and actual results, performance, transactions or achievements, financial and otherwise, may differ materially from the results,
performance, transactions or achievements expressed or implied by the forwardlooking statements. Risk, uncertainties and other factors that might cause such differences, some
of which could be material, include but are not limited to: national and local economic, business, real estate and other market conditions; the competitive environment in which
the Company operates; the execution of the Company's business plan; financing risks, including the risk of over-leverage and the corresponding risk of default on our mortgage
and other debt; increases in interest rates and operating costs; the Company's ability to maintain its status as a REIT for federal income tax purposes; acquisition and development
risks; changes in real estate and zoning laws or regulations; risks related to natural disasters; potential environmental and other liabilities; and other factors affecting the real estate
industry generally or the self-storage industry in particular; and other risks identified in this Annual Report and, from time to time, in other reports we file with the Securities and
Exchange Commission or in other documents that we publicly disseminate. We undertake no obligation to publicly update or revise these forward-looking statements, whether as
a result of new information, future events or otherwise except as may be required by securities laws.
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