2020 Annual Report
(NYSE: CUBE)
CubeSmart (NYSE: CUBE), headquartered in Malvern, Pennsylvania, is one of the largest owners and operators of self-storage properties
in the United States. CubeSmart is organized as a Maryland real estate investment trust. Our stores are designed to offer affordable, easily
accessible, and, in most locations, climate-controlled storage space for our residential and commercial customers. As of December 31, 2020,
we owned 543 stores located in 24 states and the District of Columbia containing an aggregate of approximately 38.5 million rentable square
feet. In addition, as of December 31, 2020, we managed 723 stores for third-party owners in 38 states and the District of Columbia containing
an aggregate of approximately 48.5 million rentable square feet, bringing the total number of stores we operated to 1,266.
2020 was a challenging year, but it was an opportunity to showcase the strength of our platform and resilience of our business. The
sophistication of our platform coupled with the innovative spirit of our team allowed us to rapidly respond to the many unique challenges
presented and roll out technological solutions to meet the rapidly changing needs of our customers and business. Despite the disruption
caused by the COVID-19 pandemic, we continued to successfully deliver on our core strategic objectives of:
Producing attractive organic growth in an increasingly competitive environment through a sophisticated operating platform;
Growing our portfolio of high-quality, well-positioned storage assets concentrated in targeted investment markets with appealing
demographic trends and long-term growth prospects; and
Maintaining a conservative, unsecured balance sheet that provides an attractive long-term cost of capital and the flexibility to
support our external growth objectives.
Organic Growth in a Challenging Environment
The COVID-19 pandemic created many challenges that required us to change the way we operated our stores and interacted with our
customers. Self-storage was designated an essential business in most municipalities, allowing our stores to remain open as we continued to
meet our customers’ needs. The rapidly changing environment required our team to be agile and harness our innovative spirit. Our initial
response required rapid sourcing of personal protective equipment and cleaning supplies coupled with other changes to our traditional
operational processes to ensure the safety of our teammates and customers. Our multi-year investments in customer information systems and
our team enabled us to react quickly and deploy a number of key new technological initiatives that improved the customer experience. Within
a few weeks, we launched a contactless leasing platform and by late-April we rolled out SmartRental, our fully online rental platform.
Additionally, in September we launched an industry-leading mobile application with the introduction of the CubeSmart Mobile App.
By late-spring, fundamentals began to improve, and we were able to drive strong performance through improving efficiencies of our
marketing efforts coupled with rapidly adjusting pricing strategies to account for the changing demand environment. Despite the pandemic,
we were ultimately able to generate positive same-store revenue and NOI growth and ended the year at all-time high occupancy levels,
positioning us well heading into 2021.
Impactful External Growth
Our external growth strategy is focused on growing the portfolio in markets with strong demographics across an opportunity set that includes
cash-flowing properties, recently developed properties that are still in the lease-up process, as well as select ground-up developments with
local joint venture partners. We remain disciplined in evaluating opportunities to ensure that they present appropriate risk-adjusted returns.
It was a very active year on the external growth front, as we invested $735.9 million in acquiring 21 stores across many of our targeted
investment markets. Following a near shutdown of the transaction market in the spring, improving conditions attracted sellers and we were
able to source a number of attractive opportunities in the back-half of the year. The highlight was the $540 million Storage Deluxe transaction
which was the culmination of a decade-long strategy to build the market-leading portfolio in the outer boroughs of New York City. Our
strong relationship with the team at Storage Deluxe allowed us to acquire this portfolio of eight exceptional assets located in high-growth
sub-markets of New York City in an off-market transaction. The strength of storage fundamentals continues to attract capital to the sector,
increasing competition for sourcing acquisitions; however, our team remains disciplined in searching for investment opportunities that meet
our investment criteria and offer attractive risk-adjusted returns.
Our development pipeline remains a meaningful value-creation engine as we completed one new development in Brooklyn, NY for $45.9
million in 2020. During the year, we also added two new development projects to our pipeline in the key submarkets of Valley Stream, NY
and Vienna, VA, bringing the development pipeline to $143.8 million across six projects. We continue to use joint ventures as a component
of our growth strategy, contributing $5.6 million for a 10% interest in the acquisition of a portfolio of 14 stores across Florida, Georgia, and
South Carolina. We also opportunistically disposed of one wholly-owned property in New York for $12.8 million during the year.
Our third-party management program remains a key component of our growth strategy as well, enabling us to leverage our operating platform
and brand to create value for both ourselves and our third-party owners. During 2020, we added 168 properties to the platform, ending the
year with 723 stores under management. The third-party management program continues to be a key acquisition pipeline as 11 of our 2020
acquisitions were sourced from the platform, including the Storage Deluxe portfolio.
A Conservative, Unsecured Balance Sheet
We remain committed to our objective of maintaining the financial and portfolio management flexibility afforded by an unsecured balance
sheet. Our investment grade balance sheet affords us access to attractively priced long-term capital and we continue to finance our growth
in a way that is consistent with our existing BBB/Baa2 credit ratings. We ended 2020 with debt to total gross assets of 41.0% and net debt
to EBITDA at 5.3x.
In 2020, we continued to showcase our ability to access a wide array of attractively priced capital. Once again, we accessed the public bond
market as we issued $450 million of unsecured senior notes in October with a yield to maturity of 2.1%. In addition to financing our external
growth activity, proceeds from this offering were used to redeem our $250 million debut offering of 4.8% senior notes. Additionally, we
used our “at-the-market” equity program to sell 3.6 million common shares, raising $120.7 million of net proceeds. In conjunction with the
Storage Deluxe acquisition, we leveraged the strength of our currency and platform by issuing Operating Partnership Units valued at $175.1
million as a component of the consideration.
Corporate Responsibility
The challenges faced in 2020 showcased the importance of managing our relationships with all our stakeholders. We remained dedicated to
our teammates throughout the pandemic, as we did not furlough or eliminate roles due to the impact of COVID-19. We are focused on
teammate development, offering an average of 22 hours of training and tailored development programs to each teammate which led to 370
teammates receiving promotions or transitioning into new roles to further their career development during 2020. Teammate engagement
remained a key focus, highlighted by our annual Teammate Engagement Survey which had a 91% participation rate in 2020 and provided
us an opportunity to create action plans aimed at improving engagement and wellbeing within our team. Diversity plays an important role
within our team, and our “Philosophy Regarding Respect in the Workplace” highlights the value of unique perspectives that rise through a
diverse workforce.
CubeSmart is dedicated to growing in a sustainable manner that benefits all of our stakeholders. We proactively pursue environmental and
energy-efficient initiatives that positively impact the well-being of our customers, teammates and communities, while also improving our
profitability. During 2020, we continued to install solar energy systems at select properties, invest in energy-efficient upgrades of HVAC
and lighting equipment to reduce energy consumption and minimize the use of toner and paper through our innovative paperless transaction
processes. We believe that implementation of sustainable business practices benefits our teammates, stakeholders and the communities in
which we operate.
Our Board of Trustees recognizes the importance of integrity and is dedicated to maintaining sound corporate governance and shareholder
engagement practices, as demonstrated by scoring in the top twenty percent of peer companies for corporate governance by ISS. We are
committed to the long-term benefit of our shareholders through the highest ethical standards and upholding our corporate responsibilities.
The CubeSmart Code of Business Conduct and Ethics shapes our management, operation and governance of the Company, supporting and
promoting diversity, inclusion and fairness. These values were highlighted by our recognition as a Champion of Board Diversity by the
Forum of Executive Women. Going forward, CubeSmart will strive to maintain its sound corporate governance practices, reduce the
environmental impact of its operations, and improve engagement with teammates, investors and communities.
Value Creation
At CubeSmart, we are committed to enhancing our high-quality portfolio and sophisticated operating platform while maintaining a
conservative, unsecured balance sheet to efficiently finance our growth. Despite the numerous unforeseen challenges presented during 2020,
we continued to effectively execute on all pillars of our growth strategy. Heading into 2021, self-storage fundamentals remain strong and
we believe our sophisticated platform and high-quality portfolio are well positioned for future growth. We thank you for your interest and
support as we remain focused on creating long-term value for all our stakeholders.
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
For the fiscal year ended December 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-32324 (CubeSmart)
Commission file number 000-54462 (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)
5 Old Lancaster Road
Malvern, Pennsylvania
(Address of Principal Executive Offices)
20-1024732 (CubeSmart)
34-1837021 (CubeSmart, L.P.)
(IRS Employer
Identification No.)
19355
(Zip Code)
Registrant’s telephone number, including area code (610) 535-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Shares, $0.01 par value per share, of
CubeSmart
Trading Symbol(s)
CUBE
Name of Each Exchange on Which Registered
New York Stock Exchange
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 (or for such shorter period that the
registrant was required to file such reports), 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 every Interactive Data File required to be submitted 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 such files).
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, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting company,” and “emerging growth 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 ☐
Non-accelerated filer ☒
Smaller reporting
company
Smaller reporting
company
☐
☐
Emerging growth
company
Emerging growth
company
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act.
CubeSmart
CubeSmart, L.P.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley
Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
CubeSmart
CubeSmart, L.P.
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, 2020, 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 $5,228,744,387. As of
February 24, 2021, the number of common shares of CubeSmart outstanding was 199,699,623.
As of June 30, 2020, the last business day of CubeSmart, L.P.’s most recently completed second fiscal quarter, the aggregate market value of the 1,872,308 units of limited partnership (the “OP Units”) held by non-affiliates of
CubeSmart, L.P. was $50,533,593 based upon the last reported sale price of $26.99 per share on the New York Stock Exchange on June 30, 2020 of the common shares of CubeSmart, the sole general partner of CubeSmart, L.P.
(For this computation, the market value of all OP Units beneficially owned by CubeSmart has been excluded.)
Documents incorporated by reference: Portions of the Proxy Statement for the 2021 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, 2020 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 and/or the Operating Partnership.
The Parent Company is the sole general partner of the Operating Partnership and, as of December 31, 2020, owned a 96.4% interest in
the Operating Partnership. The remaining 3.6% interest consists of common units of limited partnership interest 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 are identical, and their constituents are officers of both the Parent Company and of the Operating
Partnership.
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. 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. The Operating Partnership holds substantially all of 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 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 equity, while the Operating Partnership is a partnership with no publicly traded equity. In the financial statements, this
difference is primarily reflected in the equity (or capital for the Operating Partnership) section of the consolidated balance sheets and in the
consolidated statements of equity (or capital). Apart from the different equity treatment, the consolidated financial statements of the Parent
Company and the Operating Partnership are nearly identical.
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, and the Parent Company does not have significant assets other than its investment in the Operating Partnership.
Therefore, the assets and liabilities of the Parent Company and the Operating Partnership are the same on their respective financial
2
statements. 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 sections, signature pages and Exhibits 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 the Parent Company and the Chief Executive Officer and the Chief Financial Officer of the Operating Partnership
have made the requisite certifications and that the Parent Company and the Operating Partnership are compliant with Rule 13a-15 or
Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and 18 U.S.C. §1350.
3
TABLE OF CONTENTS
PART I
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
Item 16.
Form 10-K Summary
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28
29
31
31
31
31
33
34
44
45
45
45
46
46
46
47
47
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47
47
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PART I
Forward-Looking Statements
This Annual Report on Form 10-K, or this Report, together with 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 Exchange Act. Forward-looking statements include statements concerning the
Company’s plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans
or intentions relating to acquisitions and other information that is not historical information. In some cases, forward-looking statements can
be identified by terminology such as “believes”, “expects”, “estimates”, “may”, “will”, “should”, “anticipates” or “intends” or the negative
of such terms or other comparable terminology, or by discussions of strategy. 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. As a result, you should not rely on or construe any forward-looking statements in this Report, or which management or persons
acting on their behalf may make orally or in writing from time to time, as predictions of future events or as guarantees of future
performance. We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this Report or
as of the dates otherwise indicated in such forward-looking statements. All of our forward-looking statements, including those in this
Report, are qualified in their entirety by this statement.
There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements
contained in or contemplated by this Report. Any forward-looking statements should be considered in light of the risks and uncertainties
referred to in Item 1A. “Risk Factors” in this Report and in our other filings with the Securities and Exchange Commission (“SEC”).
These risks include, but are not limited to, the following:
adverse changes in the national and local economic, business, real estate and other market conditions;
the effect of competition from existing and new self-storage properties and operators on our ability to maintain or raise occupancy
and rental rates;
the failure to execute our business plan;
adverse impacts from the COVID-19 pandemic, other pandemics, quarantines and stay at home orders, including the impact on our
ability to operate our self-storage properties, the demand for self-storage, rental rates and fees and rent collection levels;
reduced availability and increased costs 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 or future indebtedness;
increases in interest rates and operating costs;
counterparty non-performance related to the use of derivative financial instruments;
risks related to our ability to maintain the Parent Company’s qualification as a REIT for federal income tax purposes;
the failure of acquisitions and developments to close on expected terms, or at all, or to perform as expected;
increases in taxes, fees and assessments from state and local jurisdictions;
the failure of our joint venture partners to fulfill their obligations to us or their pursuit of actions that are inconsistent with our
objectives;
reductions in asset valuations and related impairment charges;
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cyber security breaches, cyber attacks or a failure of our networks, systems or technology, which could adversely impact our
business, customer and employee relationships;
changes in real estate, zoning, use and occupancy laws or regulations;
risks related to or a consequence of natural disasters or acts of violence, pandemics, active shooters, terrorism, insurrection or war
that affect the markets in which we operate;
potential environmental and other liabilities;
governmental, administrative and executive orders and laws, which could adversely impact our business operations and customer
and employee relationships;
uninsured or uninsurable losses and the ability to obtain insurance coverage against risks and losses;
the ability to attract and retain talent in the current labor market;
other factors affecting the real estate industry generally or the self-storage industry in particular; and
other risks identified in this Report and, from time to time, in other reports that 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. Because of the factors referred to above, the
future events discussed in or incorporated by reference in this Report may not occur and actual results, performance or achievement could
differ materially from that anticipated or implied in the forward-looking statements.
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 properties in the United States.
As of December 31, 2020, we owned 543 self-storage properties located in 24 states and in the District of Columbia containing an
aggregate of approximately 38.5 million rentable square feet. As of December 31, 2020, approximately 92.3% of the rentable square
footage at our owned stores was leased to approximately 340,000 customers, and no single customer represented a significant
concentration of our revenues. As of December 31, 2020, we owned stores in the District of Columbia and the following 24
states: Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Maryland, Massachusetts, Minnesota, Nevada, New
Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah and Virginia.
In addition, as of December 31, 2020, we managed 723 stores for third parties (including 105 stores containing an aggregate of
approximately 7.5 million net rentable square feet as part of five separate unconsolidated real estate ventures) bringing the total number of
stores we owned and/or managed to 1,266. As of December 31, 2020, we managed stores for third parties in the District of Columbia and
the following 38 states: Alabama, Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky,
Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nevada, New Hampshire, New Jersey, New Mexico,
New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont,
Virginia, Washington and Wisconsin.
Our self-storage properties 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 stores
offer outside storage areas for vehicles and boats. Our stores 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 stores have a storage associate available to
assist our customers during business hours, and 309, or approximately 56.9%, of our owned stores have a manager who resides in an
apartment at the store. Our customers can access their storage cubes during business hours, and some of our stores provide customers with
24-hour access through computer-controlled access systems. Our goal is to provide customers with the highest standard of physical
attributes and service in the industry. To that end, 462, or approximately 85.1%, of our owned stores include climate-controlled cubes.
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The Parent Company was formed in July 2004 as a Maryland REIT. The Parent Company owns its assets and conducts its business
through the Operating Partnership, and its subsidiaries. The Parent Company controls the Operating Partnership as its sole general partner
and, as of December 31, 2020, owned a 96.4% interest in the Operating Partnership. The Operating Partnership was formed in July 2004
as a Delaware limited partnership and has been engaged in virtually all aspects of the self-storage business, including the development,
acquisition, management, ownership and operation of self-storage properties.
Impact of COVID-19 on the Consolidated Financial Statements and Business Operations
Since the first quarter of 2020, the world has been impacted by the spread of a novel strain of coronavirus, its variants and the disease
that they cause known as COVID-19, which has limited our ability to operate our business using traditional means. Since mid-March,
federal, state and local government agencies in the markets within which we operate have issued public health responses aimed at reducing
the spread of COVID-19, which include quarantines, stay-at-home orders and similar mandates for many individuals to substantially
restrict daily activities and for many businesses to curtail or cease normal operations. As a result, the United States has experienced,
among other things, an unprecedented increase in unemployment, significant volatility within its debt and equity capital markets and
extreme economic contraction.
Despite the operating restrictions placed on many businesses by governmental mandates that promote distancing, self-storage has been
designated as an essential business. Accordingly, our stores have remained open throughout the pandemic to allow for customers to move
in, move out, pay rent and access their belongings at all locations. Additionally, with the health and welfare of its teammates and
customers in mind, we have implemented SmartRentalTM, a contactless online rental process that eliminates the need for face-to-face
interaction, and shifted our corporate headquarters, divisional offices and sales center to remote work.
In late March 2020, in response to the pandemic and certain state and local government orders, we paused all rate increases to existing
customers and suspended our normal delinquency processes temporarily, which impacted revenue growth. In May 2020, as permitted by
governmental mandates, we began resuming our delinquency and rental rate increase processes on a jurisdiction by jurisdiction basis. To
date, we have not experienced any material degradation in rent collections or occupancy, however future customer behavior and their
ability to pay rent will be determined by the duration and scope of the pandemic; actions that have been and continue to be taken by
governmental entities, individuals and businesses in response to the pandemic; and the continued impact on economic activity from the
pandemic and actions taken in response thereto.
7
Acquisition and Disposition Activity
As of December 31, 2020 and 2019, we owned 543 and 523 stores, respectively, that contained an aggregate of 38.5 million and 36.6
million rentable square feet with occupancy levels of 92.3% and 89.5%, respectively. A complete listing of, and additional information
about, our stores is included in Item 2 of this Report. The following is a summary of our 2020, 2019 and 2018 acquisition and disposition
activity:
Asset/Portfolio
2020 Acquisitions:
Texas Asset
Maryland Asset
New Jersey Asset
Florida Asset
Texas Asset
Texas Asset
Nevada Asset
New York Asset
Storage Deluxe Assets
Florida Assets
Florida Asset
Virginia Asset
2020 Disposition:
New York Asset
2019 Acquisitions:
Maryland Asset
Florida Assets
Arizona Asset
HVP III Assets
Georgia Asset
South Carolina Asset
Texas Asset
Florida Assets
California Asset
2019 Disposition:
Texas Asset
2018 Acquisitions:
Texas Asset
Texas Asset
Metro DC Asset
Nevada Asset
North Carolina Asset
California Asset
Texas Asset
California Asset
New York Asset
Illinois Asset
2018 Dispositions:
Arizona Assets
Metropolitan Statistical Area
Transaction Date
Stores
(in thousands)
Number of Purchase / Sale Price
San Antonio, TX
Baltimore-Towson, MD
New York-Northern New Jersey-Long Island, NY-NJ-PA
Palm Bay-Melbourne-Titusville, FL
Austin-Round Rock, TX
Dallas-Fort Worth-Arlington, TX
Las Vegas-Paradise, NV
New York-Northern New Jersey-Long Island, NY-NJ-PA
New York-Northern New Jersey-Long Island, NY-NJ-PA
February 2020
April 2020
April 2020
November 2020
November 2020
November 2020
December 2020
December 2020
December 2020
Orlando-Kissimmee, FL / Deltona-Daytona Beach-Ormond Beach, FL December 2020
December 2020
December 2020
Tampa-St. Petersburg-Clearwater, FL
Washington-Arlington-Alexandria, DC-VA-MD-WV
New York-Northern New Jersey-Long Island, NY-NJ-PA
December 2020
Baltimore-Towson, MD
Cape Coral-Fort Myers, FL
Phoenix-Mesa-Scottsdale, AZ
Various (see note 4)
Atlanta-Sandy Springs-Marietta, GA
Charleston-North Charleston, SC
Dallas-Fort Worth-Arlington, TX
Orlando-Kissimmee, FL
Los Angeles-Long Beach-Santa Ana, CA
March 2019
April 2019
May 2019
June 2019
August 2019
August 2019
October 2019
November 2019
December 2019
1
1
1
1
1
1
1
1
8
3
1
1
21
1
1
1
2
1
18
1
1
1
3
1
29
$
$
$
$
$
$
9,025
17,200
48,450
3,900
10,750
10,150
16,800
6,750
540,000
45,500
10,000
17,350
735,875
12,750
12,750
22,000
19,000
1,550
128,250 (1)
14,600
3,300
7,300
32,100
18,500
246,600
College Station-Bryan, TX
October 2019
1
1
$
$
4,146
4,146
Austin-Round Rock, TX
Houston-Sugar Land-Baytown, TX
Washington-Arlington-Alexandria, DC-VA-MD-WV
Las Vegas-Paradise, NV
Charlotte-Gastonia-Concord, NC-SC
Los Angeles-Long Beach-Santa Ana, CA
Houston-Sugar Land-Baytown, TX
San Diego-Carlsbad-San Marcos, CA
New York-Northern New Jersey-Long Island, NY-NJ-PA
Chicago-Naperville-Joliet, IL-IN-WI
January 2018
May 2018
July 2018
September 2018
September 2018
October 2018
October 2018
November 2018
November 2018
December 2018
1
1
1
1
1
1
1
1
1
1
10
$
$
12,200
19,000
34,200
14,350
11,000
53,250
23,150
19,118
37,000
4,250
227,518
Phoenix-Mesa-Scottsdale, AZ
November 2018
2
2
$
$
17,502
17,502
(1) Amount represents the purchase price for 90% of the ownership interest in 191 III CUBE LLC (“HVP III”), which at the time of
the acquisition owned 18 storage properties (see note 4).
8
The comparability of our results of operations is affected by the timing of acquisition and disposition activities during the periods
reported. As of December 31, 2020, 2019 and 2018, we owned 543, 523 and 493 self-storage properties and related assets, respectively.
The following table summarizes the change in number of owned stores from January 1, 2018 through December 31, 2020:
Balance - January 1
Stores acquired
Balance - March 31
Stores acquired
Stores developed
Stores combined (1)
Balance - June 30
Stores acquired
Stores developed
Balance - September 30
Stores acquired
Stores combined (1)
Stores sold
Balance - December 31
2020
2019
2018
523
1
524
2
1
—
527
—
—
527
18
(1)
(1)
543
493
1
494
21
2
(1)
516
2
1
519
5
—
(1)
523
484
1
485
1
—
—
486
3
1
490
5
—
(2)
493
(1) On May 24, 2019 and November 10, 2020, we acquired stores located in Tempe, AZ and Merritt Island, FL for approximately
$1.6 million and $3.9 million, respectively. In each case, the store acquired is located in near proximity to an existing wholly-
owned store. Given their proximity to each other, each acquired store has been combined with the existing store in our store
count, as well as for operational and reporting purposes.
Financing and Investing Activities
The following summarizes certain financing and investing activities during the year ended December 31, 2020:
Store Acquisitions. During 2020, we acquired a portfolio of eight self-storage properties located in the outer boroughs of New York
City (the “Storage Deluxe Assets”) for an aggregate purchase price of $540.0 million. We also acquired 13 additional stores during
2020 which are located in Florida (5), Maryland (1), Nevada (1), New Jersey (1), New York (1), Texas (3) and Virginia (1) for an
aggregate purchase price of approximately $195.9 million.
Development Activity. During 2020, we completed construction and opened for operation a joint venture property located in New
York for a total cost of $45.9 million. As of December 31, 2020, we had six joint venture development properties under
construction located in Massachusetts (1), New York (2), Pennsylvania (1) and Virginia (2), which are expected to be completed by
the second quarter of 2022. As of December 31, 2020, we had invested $71.6 million of an expected $143.8 million, related to these
six projects.
Consolidated Development Joint Venture Buy-out. During 2020, we acquired the noncontrolling members’ interest in a previously
consolidated development joint venture for $10.0 million, of which $1.0 million was paid in cash. The Operating Partnership
issued 276,497 OP Units that were valued at approximately $9.0 million as consideration for the remainder of the purchase price.
The store is located in New York and is wholly-owned by the Company as of December 31, 2020.
Store Disposition. On December 22, 2020, we sold a store in New York for a sales price of $12.8 million. We recorded a $6.7
million gain in connection with the sale.
Unconsolidated Real Estate Venture Activity. During 2020, 191 IV CUBE Southeast LLC, a newly-formed unconsolidated real
estate venture in which we own a 10% interest, acquired 14 stores for an aggregate purchase price of $135.3 million, of which we
contributed $5.6 million. The acquired stores are located in Florida (2), Georgia (8) and South Carolina (4).
Unsecured Senior Note Activity. On October 6, 2020, the Operating Partnership issued $450.0 million in aggregate principal amount
of unsecured senior notes due February 15, 2031, which bear interest at a rate of 2.000% per annum (the “2031 Notes”). On October
30, 2020, with net proceeds from our issuance of the 2031 Notes, we redeemed, in full, our $250.0 million of outstanding 4.800%
senior notes due 2022.
9
Mortgage Loan Activity. During 2020, we repaid two mortgage loans with an aggregate outstanding principal balance of $10.3
million. Additionally, in connection with the acquisition of the Storage Deluxe Assets, we assumed six mortgage loans with an
aggregate outstanding principal amount of $154.4 million at the time of acquisition, one of which had an outstanding principal
balance of $33.2 million and was repaid immediately.
At-The-Market Equity Program Activity. During 2020, under our at-the-market equity program, we sold a total of 3.6 million
common shares at an average sales price of $33.69 per share, resulting in net proceeds of $120.7 million for the year, after
deducting offering costs. As of December 31, 2020, 10.9 million common shares remained available for sale under the program. We
used the proceeds from the 2020 sales under the program to fund the acquisition and development of self-storage properties and for
general corporate purposes.
Business Strategy
Our business strategy consists of several elements:
Maximize cash flow from our stores — Our operating strategy focuses on maximizing sustainable rents at our stores 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 stores within targeted markets — During 2021, 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. In the past, we have formed joint ventures with unaffiliated third parties, and in the future we may
form additional joint ventures, to facilitate the funding of future developments or acquisitions.
Dispose of stores — During 2021, we intend to continue to evaluate opportunities to dispose of assets that have unattractive risk-
adjusted returns. We intend to use proceeds from these transactions to fund acquisitions within targeted markets.
Grow our third-party management business — We intend to pursue additional third-party management opportunities and 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 and other investment opportunities.
Investment and Market Selection Process
We maintain a disciplined and focused process in the acquisition and development of self-storage properties. Our investment committee
is comprised of four senior officers who oversee our investment process. Our investment process involves six stages — identification,
initial due diligence, economic assessment, investment committee approval (and when required, the approval of our Board of Trustees (the
“Board”)), 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 stores, or where we believe that we can acquire a significant number of stores efficiently and within a short period of
time. We evaluate both the broader market and the immediate trade area, typically three miles around the store, 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, but not exclusively limited to, the Northeastern and Mid-Atlantic areas of the United States and areas within
Arizona, California, Florida, Georgia, Illinois and Texas, and to enter additional markets should suitable opportunities arise.
Quality of store — We focus on self-storage properties that have good visibility, ease of access 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 stores, 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 stores.
10
Segment
We have one reportable segment: we own, operate, develop, manage and acquire self-storage properties.
Concentration
Our self-storage properties are located in major metropolitan areas as well as suburban areas and have numerous customers per store.
No single customer represented a significant concentration of our 2020 revenues. Our stores in New York, Florida, Texas and California
provided approximately 16%, 15%, 9% and 8%, respectively, of our total revenues for the year ended December 31, 2020. Our stores in
Florida, New York, Texas and California provided approximately 16%, 16%, 10% and 8%, respectively, of our total revenues for the year
ended December 31, 2019. Our stores in Florida, New York, Texas and California provided approximately 17%, 16%, 10% and 8%,
respectively, of our total revenues for the year ended December 31, 2018.
Seasonality
We typically experience seasonal fluctuations in occupancy levels at our stores, which are generally slightly higher during the summer
months due to increased moving activity.
Financing Strategy
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, 2020, our debt to total market 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
25.6% compared to approximately 23.9% as of December 31, 2019. Our ratio of debt to the undepreciated cost of our total assets as of
December 31, 2020 was approximately 41.0% compared to approximately 39.0% as of December 31, 2019. We expect to finance
additional investments in self-storage properties through the most attractive sources of capital available at the time of the transaction, in a
manner consistent with maintaining a strong financial position and future financial flexibility, subject to limitations on incurrence of
indebtedness in our unsecured credit facilities and the indenture that governs our unsecured notes. These capital sources may include
existing cash, borrowings under the revolving portion of our credit facility, additional secured or unsecured financings, sales of common or
preferred shares of the Parent Company in public offerings or private placements, additional issuances of debt securities, issuances of
common or preferred units in our Operating Partnership in exchange for contributed properties and formations of joint ventures. We also
may sell stores that have unattractive risk-adjusted returns and use the sales proceeds to fund other acquisitions.
Competition
Self-storage properties compete based on a number of factors, including location, rental rates, occupancy, security, suitability of the
store’s design to prospective customers’ needs and the manner in which the store is operated and marketed. In particular, the number of
competing self-storage properties in a market could have a material effect on our occupancy levels, rental rates and on the overall
operating performance of our stores. We believe that the primary competition for potential customers of any of our self-storage properties
comes from other self-storage providers within a three-mile radius of that store. We believe our stores are well-positioned within their
respective markets, and we emphasize customer service, convenience, security, professionalism and cleanliness.
Our key competitors include local and regional operators as well as the other public self-storage REITs, including Public Storage, Extra
Space Storage Inc., Life Storage, Inc. and National Storage Affiliates Trust. These companies, some of which operate significantly more
stores than we do and have greater resources than we have, and other entities may be able to accept more risk than we determine is prudent
for us, including risks with respect to the geographic proximity of investments and the payment of higher acquisition prices. This
competition may reduce the number of suitable acquisition opportunities available to us, increase the price required to acquire stores and
reduce the demand for self-storage space at our stores. Nevertheless, we believe that our experience in operating, managing, acquiring,
developing and obtaining financing for self-storage properties 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 regulations that apply generally to the ownership of real property and the operation of self-storage properties.
11
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 stores. 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 stores 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
stores or websites is not in compliance with the ADA or similar state or local requirements would result in the incurrence of additional
costs associated with bringing them into compliance.
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 our properties 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 properties.
Whenever the environmental assessment for one of our stores indicates that a store 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 store 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, we have purchased
environmental liability insurance coverage to indemnify us 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 provide
assurance, 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 stores, nor have we been notified of a claim for personal injury or property damage by a private party in connection with any of our
stores relating to environmental conditions.
We are not aware of any environmental condition with respect to any of our stores 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 provide assurance, however,
that this will continue to be the case.
Insurance
We carry comprehensive liability, fire, casualty, extended coverage and rental loss insurance covering all of the properties in our
portfolio. We also carry environmental insurance coverage on certain stores 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, flood and environmental hazards, because such
coverage is either not available or 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. Additionally, we use a combination of insurance products to provide risk mitigation for
potential liabilities associated with automobiles, workers’ compensation, employment practices, general contractors, directors and officers,
employee health-care benefits and personal injuries that might be sustained at our stores.
Offices
Our principal executive offices are located at 5 Old Lancaster Road, Malvern, PA 19355. Our telephone number is (610) 535-5000.
12
Human Capital
At CubeSmart, we refer to our employees as teammates, because collaboration towards shared goals defines our workplace. We care
deeply about the experience our teammates have working with us. The CubeSmart work experience takes a holistic approach to our
teammates’ total wellbeing at work. Our teammate value proposition includes promoting a sense of belonging to a team; providing
opportunities to make a meaningful difference at work and in their communities; supporting our teammates’ ongoing personal and
professional development; and offering competitive pay and rewards.
As of December 31, 2020, CubeSmart employed 3,111 teammates, all within the United States. Of the total employees, 90% were
hourly and 10% salaried; we have no union presence or collective bargaining agreements. Our average teammate tenure as of December
31, 2020 was 3.4 years.
Company Culture and Teammate Experience
We measure our teammates’ experience each year through our Teammate Engagement Survey. In 2020, our annual engagement survey
had a 91% participation rate. Results are communicated within individual teams to share what we learned and discuss both the positive
aspects about working at CubeSmart and where we have opportunities to improve. Supervisors work with their teams to create action plans
that are specific to the engagement and wellbeing of the individuals within those teams. Through ongoing conversations and transparent
commitment to continuous improvement, every CubeSmart teammate plays a role in building our company culture and making the
experience working here the best it can be.
Teammate Development and Wellbeing
As part of our culture, it is our goal to help teammates grow with us and leverage their development both at CubeSmart and beyond. We
believe in providing all teammates with training and development opportunities to succeed in their role. We plan, design and deliver
training programs for all levels of the organization, from orientation and general job skills to enhancing leadership capabilities through
skills trainings and mentoring. In 2020, we provided an average of 22 hours of training per teammate.
When recruiting new teammates, our talent management team engages with our store management teams to identify a pool of potential
candidates to serve our customers and deliver best in class customer service. We recruited, hired and trained 1,274 teammates during the
year ended December 31, 2020. Additionally, more than 370 teammates were promoted into new roles and/or transitioned into new
positions to further their career development.
We believe that career growth and personal development is an important part of our teammates’ personal and professional success. To
further support our teammates’ success, we offer a number of benefits aimed at supporting the wellbeing of our teammates and their
families. Those benefits include: medical, dental, vision, disability and life insurance coverage. We also offer a variety of programs
designed to provide teammates with the ability to rest, rejuvenate and take care of their families such as paid holidays, vacation and sick
time, and parental leave. Our Employee Assistance Program is available to all teammates, providing extra support as they and their
families experience life changes and challenges.
Another important part of our teammates’ wellbeing is their connection to a larger sense of purpose. We empower our teammates to
find this with us and provide programs and opportunities for them. Our Idea Center provides a forum where teammates can submit ideas to
enhance the workplace, streamline systems and processes and identify solutions and best practices. We encourage our teammates to
participate in community service and philanthropy, and provide paid time off for teammates who participate in these activities. Also,
through our matching gifts program, we match qualified charitable contributions made by teammates up to $100 per teammate each year.
Diversity, Equity and Inclusion
Our Philosophy Regarding Respect in the Workplace defines our approach to diversity, inclusion and treatment of differences. Our
Philosophy is acknowledged by teammates and states:
At CubeSmart, we respect, value, and celebrate the unique attributes, characteristics and perspectives that make each teammate who
they are. We believe that our business is better because of the diversity of participation, thought, and action that comes from the unique
individuals who come to work here. Every teammate deserves the right to come to work as their authentic self. Our goal for CubeSmart is
to be a place where people feel supported, listened to, and able to do their personal best. Our philosophy isn’t any different from our
philosophy regarding Customer interactions, namely to “treat our Customers as they want to be treated.” When it comes to our
teammates, we ask that every teammate “treat our teammates as they want to be treated.”
13
As of December 31, 2020, of our total teammate population, 54% are female and 46% are male. Approximately 47% have self-
identified as Black or African American, Hispanic or Latino, Asian, American Indian, or of two or more races. The average teammate age
is 40; 43% of our teammates are 34 and younger while 36% of our teammates are 45 or older.
COVID-19 Update
The situation surrounding the COVID-19 virus in our country changed our business operations. Throughout the pandemic, we have
closely monitored legal requirements and the advice of experts, and put actions into place as we found to be necessary. The goal of these
actions was to find a way to still provide a differentiated CubeSmart customer experience while safeguarding the health of our teammates
and customers in this ever-changing environment. The actions we took in 2020 to support the wellbeing of our teammates included:
As self-storage was considered an essential business type from the onset of the pandemic, we kept our stores open in order for us
to serve our customers, support our communities and, most importantly, provide work to our teammates. We made it a priority to
adjust schedules to provide as many store teammates with full-time hours as possible. As a result, we did not furlough or
eliminate roles as a direct impact of COVID-19.
In March 2020, we introduced COVID Pay, offering eligible teammates up to two weeks of time off with pay should they be
unable to work due to certain COVID-19-related circumstances outside of their control. This benefit will continue to be available
to teammates in 2021.
We adjusted our operational practices to minimize teammate and customer exposure and to reinforce social distancing. We
provided personal protective equipment to meet newly established guidelines, including requiring face coverings nationwide.
Our corporate office, sales center and divisional office teammates shifted to working remotely and were provided tools and
training to support continued collaboration and delivery on our mission from their various locations.
Available Information
We file registration statements, proxy statements, annual reports 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 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 charge, copies of our
annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and any amendments to those reports,
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 Report.
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 — 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 5 Old Lancaster Road, Malvern,
PA 19355.
14
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 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. Adverse economic conditions affecting disposable consumer income, such as employment levels, business conditions, interest
rates, tax rates and 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 economic and financial market disruptions and the many ways in which they may
affect our customers and our business in general. Nonetheless, financial and macroeconomic disruptions could have a significant adverse
effect on our sales, profitability and results of operations.
Our financial performance is dependent upon economic and other conditions of the markets in which our stores 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 stores in New York, Florida, Texas and California
accounted for approximately 16%, 15%, 9% and 8%, respectively, of our total 2020 revenues. As a result of this geographic concentration
of our stores, 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.
Our business, financial condition, results of operations and share price have, and may continue to be, impacted by the COVID-19
pandemic and such impact could be materially adverse.
Since the first quarter of 2020, the world has been impacted by the spread of a novel strain of coronavirus and its variants and the
disease that it causes known as COVID-19, which has resulted in global business disruptions and significant volatility in U.S. and
international debt and equity markets. There continues to be significant uncertainty around the breadth and duration of business disruptions
related to COVID-19, as well as its impact on the U.S. economy. The extent to which the COVID-19 pandemic ultimately impacts our
business, results of operations, financial condition and share price will depend on numerous evolving factors, including, among others: the
duration and scope of the pandemic; actions that have been and continue to be taken by governmental entities, individuals and businesses
in response to the pandemic; the impact on economic activity from the pandemic and actions taken in response thereto; the impact on
capital availability and costs of capital; the impact on our employees any other operational disruptions or difficulties we may face; and, the
effect on our customers and their ability to make rental payments. Any of these events, individually or in aggregate, could have a material
adverse impact on the Company’s business, financial condition, results of operations and share price.
We face risks associated with property acquisitions.
We intend to continue to acquire individual and portfolios of self-storage properties. The purchase agreements that we enter into in
connection with acquisitions typically contain closing conditions that need to be satisfied before the acquisitions can be consummated. The
satisfaction of many of these conditions is outside of our control, and we therefore cannot assure that any of our pending or future
acquisitions will be consummated. These conditions include, among other things, satisfactory examination of the title, zoning and
entitlements to the properties, the ability to obtain title insurance and customary closing deliverables and conditions. Moreover, in the
15
event we are unable to complete pending or future acquisitions, we may have incurred significant legal, accounting, due diligence and
other transaction costs in connection with such acquisitions without realizing the expected benefits.
Those acquisitions that we do consummate 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:
acquisitions may fail to perform as expected;
the actual costs of repositioning or redeveloping acquired properties 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; and
there is only limited recourse, or no recourse, to the former owners of newly acquired properties for unknown or undisclosed
liabilities such as the clean-up of undisclosed environmental contamination; claims by customers, vendors or other persons arising
on account of actions or omissions of the former owners of the properties; and claims by local governments, adjoining property
owners, property owner associations and easement holders for fees, assessments or taxes on other property-related changes. As a
result, if a liability were asserted against us based upon ownership of an acquired property, we might be required to pay
significant sums to settle it, which could adversely affect our financial results and cash flow.
In addition, we often do not obtain third-party appraisals of acquired properties and instead rely on internal value determinations.
We will incur costs and will face integration challenges when we acquire additional stores.
As we acquire or develop additional self-storage properties and bring additional self-storage properties onto our third-party management
platform, we will be subject to risks associated with integrating and managing new stores, including customer retention and mortgage
default risks. In the case of a large portfolio purchase, we could experience strains in our existing systems and management capacities. 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 depreciate/amortize in future periods costs for acquired
real property and 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 stores that lack operating history with us will make it more difficult to predict revenue potential.
We intend to continue to acquire additional stores. 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 store up to the standards
established for our intended market position, the performance of the store may be below expectations. Acquired stores may have
characteristics or deficiencies affecting their valuation or revenue potential that we have not yet discovered. We cannot assure that the
performance of stores acquired by us will increase or be maintained under our management.
Our development activities may be more costly or difficult to complete than we anticipate.
We intend to continue to develop self-storage properties where market conditions warrant such investment. Once made, these
investments may not produce results in accordance with our expectations. Risks associated with development and construction activities
include:
the unavailability of favorable financing sources in the debt and equity markets;
construction cost overruns, including on account of rising interest rates, diminished availability of materials and labor, and
increases in the costs of materials and labor;
construction delays and failure to achieve target occupancy levels and rental rates, resulting in a lower than projected return on
our investment; and
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complications (including building moratoriums and anti-growth legislation) in obtaining necessary zoning, occupancy and other
governmental permits.
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 stores, satisfy our debt obligations and/or make distributions to shareholders.
We depend on external sources of capital to fund acquisitions and 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,
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 properties when strategic opportunities exist, satisfy our
debt obligations, make distributions to shareholders that would permit us to qualify as a REIT or avoid paying tax on our REIT taxable
income.
If we are unable to promptly re-let our cubes or if the rates upon such re-letting are significantly lower than expected, 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 properties 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.
Store ownership through joint ventures may limit our ability to act exclusively in our interest.
We co-invest 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 stores 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 customers and acquisition and development opportunities.
Actions by our competitors may decrease or prevent increases of the occupancy and rental rates of our stores. We compete with
numerous developers, owners and operators of self-storage properties, including other REITs, as well as on-demand storage providers,
some of which own or may in the future own stores similar to ours in the same submarkets in which our stores are located and some of
which may have greater capital resources. In addition, due to the relatively low cost of each individual self-storage property, other
developers, owners and operators have the capability to build additional stores that may compete with our stores.
If our competitors build new stores that compete with our stores or offer space at rental rates below the rental rates we currently charge
our customers, we may lose potential customers, and we may be pressured to reduce our rental rates below those we currently charge in
order to retain customers when our customers’ leases expire. As a result, our financial condition, cash flow, cash 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 stores 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 stores. 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
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 stores are located and, as a result,
adversely affect our operating results.
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Potential losses may not be covered by insurance.
We carry comprehensive liability, fire, casualty, extended coverage and rental loss insurance covering all of the properties in our
portfolio. We also carry environmental insurance coverage on certain stores 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, flood and environmental hazards, because such
coverage is either 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 store that is uninsured or that exceeds policy limits, we
could lose the capital invested in that store as well as the anticipated future cash flows from that store. 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 store after it has been damaged or destroyed. In addition, if the damaged stores are subject to recourse indebtedness, we would
continue to be liable for the indebtedness, even if these stores were irreparably damaged.
Additionally, we use a combination of insurance products, some of which include deductibles and self-insured retention amounts, to
provide risk mitigation for potential liabilities associated with automobiles, workers’ compensation, employment practices, general
contractors, cyber risks, crime, directors and officers, employee health-care benefits and personal injuries that might be sustained at our
stores. Liabilities associated with the risks that are retained by us are estimated, in part, by considering historical claims experience and
actuarial assumptions. Our results of operations could be materially impacted by claims and other expenses related to such insurance plans
if future occurrences and claims differ from these assumptions and historical trends.
Our insurance coverage may not comply with certain loan requirements.
Certain of our stores serve as collateral for our mortgage-backed debt, some of which we assumed in connection with our acquisition of
stores and requires us to maintain insurance, deductibles, retentions and other policy terms at levels 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.
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 properties. 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 property 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 property or to borrow
using such property as collateral. In addition, in connection with the ownership, operation and management of 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 stores.
We carry environmental insurance coverage on certain stores 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 stores). 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 that our environmental
assessments have identified or will identify all material environmental conditions, that any prior owner of any property did not create a
material environmental condition not actually known to us, that environmental conditions on neighboring properties will not have an
impact on any of our properties, or that a material environmental condition does not otherwise exist with respect to any of our properties.
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Americans with Disabilities Act and applicable state accessibility act compliance may require unanticipated expenditures.
Under the ADA, all places of public accommodation are required to meet federal requirements related to 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 properties or
websites. 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 properties and websites 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 properties or websites 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 properties or websites 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.
We face system security risks as we depend upon automated processes and the internet, which could damage our reputation, cause us
to incur substantial additional costs and become subject to litigation if our systems or processes are penetrated.
We are increasingly dependent upon automated information technology processes and internet commerce, and many of our new
customers come from the telephone or over the internet. Moreover, the nature of our business involves the receipt and retention of personal
information about our customers. We also rely extensively on third-party vendors to retain data, process transactions and provide other
systems and services. These systems, and our systems, are subject to damage or interruption from power outages, computer and
telecommunications failures, computer viruses, malware and other destructive or disruptive security breaches and catastrophic events, such
as a natural disaster or a terrorist event or cyber-attack. In addition, experienced computer programmers and hackers may be able to
penetrate our security systems and misappropriate our confidential information, create system disruptions or cause shutdowns. Such data
security breaches as well as system disruptions and shutdowns could result in additional costs to repair or replace such networks or
information systems and possible legal liability, including government enforcement actions and private litigation. In addition, our
customers could lose confidence in our ability to protect their personal information, which could cause them to discontinue leasing at our
stores.
If we are unable to attract and retain team members or contract with third parties having the specialized skills or technologies needed to
support our systems, implement improvements to our customer-facing technology in a timely manner, allow accurate visibility to product
availability when customers are ready to rent, quickly and efficiently fulfill our customers rental and payment methods they demand or
provide a convenient and consistent experience for our customers regardless of the ultimate sales channel, our ability to compete and our
results of operations could be adversely affected.
Risks Related to the Real Estate Industry
Our performance and the value of our self-storage properties are subject to risks associated with our properties and with the real estate
industry.
Our rental revenues, 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 stores 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 properties 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, personnel, insurance premiums, customer acquisition costs and real estate
taxes;
changes in interest rates and availability of financing;
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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, 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 real estate portfolio consists primarily of self-storage properties, 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 could be adversely affected by weakness in the national, regional and
local economies, changes in supply of, or demand for, similar or competing self-storage properties 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.
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
properties for investment, rather than for sale in the ordinary course of business, which may cause us to forgo or defer sales of properties
that otherwise would be in our best interest. Therefore, we may not be able to dispose of properties 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 Report 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 and joint ventures 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. Changes to rules governing REITs were made by legislation commonly known as the Tax Cuts and Jobs Act (the
“TCJA”) and the Protecting Americans From Tax Hikes Act of 2015, signed into law on December 22, 2017 and December 18, 2015,
respectively, and Congress and the IRS might make further 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.
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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 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.
Furthermore, we owned a subsidiary REIT (“PSI”) that was liquidated on December 31, 2018. Prior to liquidation, PSI was
independently subject to, and was required to comply with, the same REIT requirements that we must satisfy in order to qualify as a REIT,
together with all other rules applicable to REITs. If PSI failed to qualify as a REIT during our period of ownership, and certain statutory
relief provisions do not apply, as a result of a protective election made jointly by PSI and CubeSmart, PSI should be taxed as a taxable
REIT subsidiary. See the section entitled “Taxation of CubeSmart−Requirements for Qualification−Taxable REIT Subsidiaries” in Exhibit
99.1 for more information regarding taxable REIT subsidiaries.
Failure of the Operating Partnership (or a subsidiary partnership or joint venture) 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 or joint ventures
for federal income tax purposes, the Operating Partnership or the affected subsidiary partnership or joint venture 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, a
subsidiary partnership or joint venture 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,
excluding net capital gains, 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
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.
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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.
Legislative or regulatory tax changes related to REITs could materially and adversely affect our business.
At any time, the federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or
regulations may be changed, possibly with retroactive effect. We cannot predict if or when any new federal income tax law, regulation or
administrative interpretation, or any amendment to any existing federal income tax law, regulation or administrative interpretation, will be
adopted, promulgated or become effective or whether any such law, regulation or interpretation may take effect retroactively. We and our
shareholders could be adversely affected by any such change in, or any new, federal income tax law, regulation or administrative
interpretation.
For example, the TCJA made significant changes to the U.S. federal income tax rules for taxation of individuals and corporations,
generally effective for taxable years beginning after December 31, 2017. In addition to reducing corporate and non-corporate tax rates, the
TCJA eliminated or restricted various deductions. One such deduction limitation was a general limitation of the deduction for net business
interest expense in excess of 30% (50% for non-partnership entities for their 2019 and 2020 taxable years and for partnerships for their
2020 taxable years under the Coronavirus Aid, Relief and Economic Security Act of 2020) of a business’s “adjusted taxable income,”
except for taxpayers that engage in certain real estate businesses and elect out of this rule (provided that such electing taxpayers must use
an alternative depreciation system with longer depreciation periods). Most of the changes applicable to individuals were temporary and
apply only to taxable years beginning after December 31, 2017 and before January 1, 2026. The TCJA made numerous large and small
changes to the tax rules that do not affect the REIT qualification rules directly but may otherwise affect us or our shareholders.
Shareholders are urged to consult with their tax advisors with respect to the status of the TCJA and any other regulatory or
administrative developments and proposals and their potential effect on investment in our capital stock.
Dividends paid by REITs do not qualify for the reduced tax rates provided under current law.
Dividends paid by REITs are generally not eligible for the reduced 15% maximum tax rate for dividends paid to individuals (20% for
those with taxable income above certain thresholds that are adjusted annually under current law). The more favorable rates applicable to
regular corporate dividends could cause shareholders who are individuals to perceive investments in REITs to be relatively less attractive
than investments in the stock of non-REIT corporations that pay dividends to which more favorable rates apply, which could reduce the
value of REIT stocks.
Legislation modifies the rules applicable to partnership tax audits.
The Bipartisan Budget Act of 2015 requires our Operating Partnership and any subsidiary partnership to pay the hypothetical increase in
partner-level taxes (including interest and penalties) resulting from an adjustment of partnership tax items on audit or in other tax
proceedings, unless the partnership elects an alternative method under which the taxes resulting from the adjustment (and interest and
penalties) are assessed at the partner level. Uncertainties remain as to the application of these rules, including the application of the
alternative method to partners that are REITs, and the impact they will have on us. However, it is possible that partnerships in which we
invest may be subject to U.S. federal income tax, interest and penalties in the event of a U.S. federal income tax audit as a result of these
law changes.
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
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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 our shareholders.
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.
Financing our future growth plan or refinancing existing debt maturities could be impacted by negative capital market conditions.
From time to time, domestic financial markets experience 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 from 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; there can be no assurance that we will be able to continue to 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 stores. 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 stores 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 stores
foreclosed on, could threaten our continued viability.
Our Credit Facility (defined below) 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 other tests. Our ability to borrow under the 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 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. Similarly, the indenture under which we have issued
unsecured senior notes contains customary financial covenants, including limitations on incurrence of additional indebtedness.
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 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.
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Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect
our financial results.
As of December 31, 2020, we did not have any outstanding debt that was indexed to the London Interbank Offered Rate (“LIBOR”)
other than borrowings under our Revolver. On July 27, 2017, the Financial Conduct Authority (“FCA”), which regulates LIBOR,
announced its intention to phase out LIBOR rates by the end of 2021. On November 30, 2020, the ICE Benchmark Administration Limited
(“IBA”) announced that it is considering an 18-month extension (to June 30, 2023) on certain U.S. dollar LIBOR rates, including the rate
that our Revolver is indexed to. It is not possible to predict the further effect of these announcements, any changes in the methods by
which LIBOR is determined, or any other reforms to LIBOR that may be enacted in the United Kingdom, the European Union or
elsewhere. Such developments may cause LIBOR to perform differently than in the past, or cease to exist. In addition, any other legal or
regulatory changes made by the FCA, the IBA, the European Money Markets Institute (formerly Euribor-EBF), the European Commission
or any other successor governance or oversight body, or future changes adopted by such body, in the method by which LIBOR is
determined or the transition from LIBOR to a successor benchmark may result in, among other things, a sudden or prolonged increase or
decrease in LIBOR, a delay in the publication of LIBOR, and changes in the rules or methodologies in LIBOR, which may discourage
market participants from continuing to administer or to participate in LIBOR’s determination, and, in certain situations, could result in
LIBOR no longer being determined and published. If a published U.S. dollar LIBOR rate becomes unavailable, the interest rates on our
debt which is indexed to LIBOR will be determined using alternative methods, which may result in interest obligations which are more
than or do not otherwise correlate over time with the payments that would have been made on such debt if U.S. dollar LIBOR was
available in its current form. Further, the same costs and risks that may lead to the unavailability of U.S. dollar LIBOR may make one or
more of the alternative methods impossible or impracticable to determine. Any of these proposals or consequences could have a material
adverse effect on our financing costs, and as a result, our financial condition, operating results and cash flows.
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. Our
Chief Executive Officer, Chief Financial Officer, Chief Legal Officer and Chief Operating Officer are parties to the Company’s executive
severance plan, however, we cannot provide 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, 2020, we had 2,654 property-level personnel involved in the management and operation of our stores. The customer
service, marketing skills and knowledge of local market demand and competitive dynamics of our store managers are contributing factors
to our ability to maximize our rental income and to achieve the highest sustainable rent levels at each of our stores. We 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 adversely affected.
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
24
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 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, (2) amend our bylaws or repeal individual bylaws in a manner that provides the Board with greater authority,
and (3) issue additional equity securities. 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 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 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 by
them in those capacities on our behalf, 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 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 to issue up to 40,000,000 preferred shares, 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 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 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.
25
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 fluctuation and may continue to fluctuate or decline. Between January 1,
2018 and December 31, 2020, the closing price per share of our common shares has ranged from a high of $36.31 (on September 4, 2019)
to a low of $20.85 (on March 23, 2020). 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 share price is volatile, we may become the target of securities
litigation, which could result in substantial costs and divert our management’s attention and resources from our business.
General Risk Factors
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, paid time off and severance payments for employees, could adversely impact our business and results of operations.
We may incur impairment charges.
We evaluate on a quarterly basis our real estate portfolio for indicators of impairment. Impairment charges reflect management’s
judgment of the probability and severity of the decline in the value of real estate assets we own. These charges and provisions may be
required in the future as a result of factors beyond our control, including, among other things, changes in the economic environment and
market conditions affecting the value of real property assets or natural or man-made disasters. If we are required to take impairment
charges, our results of operations will be adversely impacted.
26
Rising operating expenses could reduce our cash flow and funds available for future distributions.
Our stores and any other stores 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 stores are subject to increases in operating expenses such as real estate, sales and
other taxes, personnel costs including mandated minimum hourly wage rates and the cost of providing specific medical coverage and
governmental mandated benefits to our employees, utilities, customer acquisition costs, 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.
We cannot assure 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. Our ability to pay dividends will depend upon, among other factors:
the operational and financial performance of our stores;
capital expenditures with respect to existing and newly acquired stores;
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 Report.
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.
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, internet domains 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 are 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.
27
Legislative actions and changes may cause our general and administrative costs and compliance costs to increase.
In order to comply with laws adopted by federal, state or local government or regulatory bodies, we may be required to increase our
expenditures and hire additional personnel and additional outside legal, accounting and advisory services, all of which may cause our
general and administrative and compliance costs to increase. Significant workforce-related legislative changes could increase our expenses
and adversely affect our operations. Examples of possible workforce-related legislative changes include changes to an employer's
obligation to recognize collective bargaining units, the process by which collective bargaining agreements are negotiated or imposed,
minimum wage requirements and health care and medical and family leave mandates. In addition, changes in the regulatory environment
affecting health care reimbursements, and increased compliance costs related to enforcement of federal and state wage and hour statutes
and common law related to overtime, among others, could cause our expenses to increase without an ability to pass through any increased
expenses through higher prices.
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,
including California and New York, have imposed restrictions and requirements on the use of personal information by those collecting
such information. The regulatory framework for privacy issues is rapidly evolving and future enactment of more restrictive laws, rules or
regulations and/or future enforcement actions or investigations could have a materially adverse impact on us through increased costs or
restrictions on our business. Failure to comply with such laws and regulations could result in consent orders or regulatory penalties and
significant legal liability, including fines, which could damage our reputation and have an adverse effect on our results of operations or
financial condition.
Terrorist attacks, active shooter incidents 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 at or against our stores, the United States or our interests, may negatively impact our operations and the value of our
securities. Attacks, armed conflicts or active-shooter situations could negatively impact the demand for self-storage and increase the cost
of insurance coverage for our stores, which could reduce our profitability and cash flow. Furthermore, any terrorist attacks, armed conflicts
or active-shooter situations could result in increased volatility in or damage to the United States and worldwide financial markets and
economy.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
28
ITEM 2. PROPERTIES
As of December 31, 2020, we owned 543 self-storage properties that contain approximately 38.5 million rentable square feet and are
located in 24 states and the District of Columbia. The following table sets forth summary information regarding our stores by state as of
December 31, 2020.
State
Florida
Texas
New York
California
Illinois
Arizona
New Jersey
Maryland
Georgia
Ohio
Connecticut
Massachusetts
Virginia
North Carolina
Tennessee
Nevada
Colorado
Pennsylvania
South Carolina
Washington D.C.
Rhode Island
Utah
New Mexico
Minnesota
Indiana
Total/Weighted average
Number of Number of
Total
Rentable
Stores
Units
Square Feet
% of Total
Rentable
Square Feet
Ending
Occupancy
89
69
57
43
42
31
27
18
20
20
22
19
11
11
9
9
11
9
8
5
4
4
3
1
1
543
64,517
41,623
81,333
29,486
25,240
18,208
19,852
15,042
12,432
11,091
10,744
11,967
8,819
6,666
5,650
5,703
6,024
6,321
3,881
5,292
2,021
2,319
1,692
1,037
579
397,539
6,757,664
4,907,408
4,510,761
3,125,150
2,695,892
1,945,585
1,896,315
1,487,626
1,454,877
1,290,303
1,193,152
1,172,310
867,440
760,223
755,515
724,282
697,377
624,356
432,389
409,500
245,545
239,198
182,261
101,028
67,600
38,543,757
17.5 %
12.7 %
11.7 %
8.1 %
7.0 %
5.0 %
4.9 %
3.9 %
3.8 %
3.3 %
3.1 %
3.0 %
2.3 %
2.0 %
2.0 %
1.9 %
1.8 %
1.6 %
1.1 %
1.1 %
0.6 %
0.6 %
0.5 %
0.3 %
0.2 %
100.0 %
93.3 %
92.4 %
88.3 %
95.3 %
93.8 %
93.0 %
92.0 %
92.7 %
90.9 %
92.7 %
94.5 %
89.9 %
90.8 %
91.9 %
91.0 %
91.4 %
94.3 %
90.8 %
92.4 %
92.9 %
94.8 %
88.6 %
92.5 %
90.7 %
90.9 %
92.3 %
We have grown by adding stores to our portfolio through acquisitions and development. The tables set forth below show the average
occupancy, annual rent per occupied square foot and total revenues for our stores owned as of December 31, 2020, and for each of the
previous three years, grouped by the year during which we first owned or operated the store.
Stores by Year Acquired - Average Occupancy
Year Acquired (1)
2017 and earlier
2018
2019
2020
Rentable
Average Occupancy
# of Stores Square Feet 2020
2019
2018
480 33,720,992 92.9 % 91.6 % 90.9 %
992,334 78.4 % 66.1 % 56.7 %
2,023,024 83.1 % 74.2 %
1,807,407 72.3 %
—
—
—
11
31
21
All stores owned as of December 31, 2020
543 38,543,757 91.9 % 90.4 % 90.6 %
29
Stores by Year Acquired - Annual Rent Per Occupied Square Foot (2)
Year Acquired (1)
2017 and earlier
2018
2019
2020
All stores owned as of December 31, 2020
Stores by Year Acquired - Total Revenues (dollars in thousands)
Year Acquired (1)
2017 and earlier
2018
2019
2020
All stores owned as of December 31, 2020
# of Stores 2020
2019
2018
Rent per Square Foot
480 $ 17.71 $ 17.81 $ 17.46
24.76
—
—
543 $ 18.22 $ 17.80 $ 17.58
22.69
15.18
—
22.57
14.62
30.89
11
31
21
# of Stores
2020
Total Revenues
2019
2018
480 $ 589,232 $ 581,157 $ 564,292
4,137
—
—
543 $ 638,449 $ 608,728 $ 568,429
15,730
11,841
—
18,609
26,271
4,337
11
31
21
(1) Represents the year acquired for those stores we acquired from a third party or the year placed in service for those stores we
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 $15.3 million, $21.5 million and $19.9 million for the periods ended December 31, 2020, 2019 and 2018,
respectively.
Unconsolidated Real Estate Ventures
As of December 31, 2020, we held common ownership interests ranging from 10% to 50% in four unconsolidated real estate ventures
for an aggregate investment balance of $92.1 million. We formed interests in these real estate ventures with unaffiliated third parties to
acquire, own and operate self-storage properties in select markets. As of December 31, 2020, these four unconsolidated real estate ventures
owned 83 self-storage properties that contain an aggregate of approximately 5.8 million net rentable square feet. The self-storage
properties owned by these four real estate ventures are managed by us and are located in Arizona (2), Connecticut (5), Florida (6),
Georgia (10), Maryland (1), Massachusetts (6), Minnesota (1), North Carolina (1), Pennsylvania (1), Rhode Island (2), South Carolina (4),
Texas (42) and Vermont (2).
On September 5, 2018, we invested $5.0 million in exchange for 100% of the Class A preferred units of Capital Storage Partners, LLC
(“Capital Storage”), a newly formed venture that acquired 22 self-storage properties that contain an aggregate of approximately 1.7 million
net rentable square feet. The stores owned by Capital Storage are located in Florida (4), Oklahoma (5) and Texas (13). The Class A
preferred units earn an 11% cumulative dividend prior to any other distributions.
Each of these ventures has assets and liabilities that we do not consolidate in our financial statements.
We account for our investments in real estate ventures using the equity method when it is determined that we have the ability to exercise
significant influence over the venture. See note 5 to the consolidated financial statements for further disclosure regarding the assets,
liabilities and operating results of our unconsolidated real estate ventures which we account for using the equity method of accounting.
Capital Expenditures
We have a capital improvement program that includes office upgrades, adding climate control to select cubes, construction of parking
areas and other store upgrades. For 2021, we anticipate spending approximately $10.5 million to $15.5 million associated with these
capital expenditures. For 2021, we also anticipate spending approximately $11.0 million to $16.0 million on recurring capital expenditures
and approximately $34.0 million to $49.0 million on the development of new self-storage properties.
30
ITEM 3. LEGAL PROCEEDINGS
To our knowledge, no legal proceedings are pending against us, other than routine actions and administrative proceedings, and other
actions not deemed material, and which, in the aggregate, are not expected to have a material adverse effect on our financial condition,
results of operations or cash flows.
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
Repurchase of Parent Company Common Shares
The following table provides information about repurchases of the Parent Company’s common shares during the three months ended
December 31, 2020:
October 1 - October 31
November 1 - November 30
December 1 - December 31
Total
Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs
Average
Price Paid
Per Share
Maximum
Number of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs
Total
Number of
Shares
Purchased (1)
390
154
78
622
$ 33.17
$ 33.80
$ 33.08
$ 33.31
N/A
N/A
N/A
N/A
3,000,000
3,000,000
3,000,000
3,000,000
(1) Represents common shares withheld by the Parent Company upon the vesting of restricted shares to cover employee tax
obligations.
On September 27, 2007, the Parent Company announced that the Board of Trustees approved a share repurchase program for up to 3.0
million of the Parent Company’s outstanding common shares. Unless terminated earlier by resolution of the Board of Trustees, the
program will expire when the number of authorized shares has been repurchased. The Parent Company has made no repurchases under this
program to date.
Market Information for and Holders of Record of Common Shares
As of December 31, 2020, there were 148 registered record holders of the Parent Company’s common shares and 20 holders (other than
the Parent Company) of the Operating Partnership’s common units. These amounts do not include common shares held by brokers and
other institutions on behalf of shareholders. The Parent Company’s common stock is traded on the New York Stock Exchange (“NYSE”)
under the symbol CUBE. There is no established trading market for units of the Operating Partnership.
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 a capital gain or may
constitute a tax-free return of capital. Annually, we provide each of the Parent Company’s common shareholders a statement detailing the
tax characterization of dividends paid during the preceding year as ordinary income, capital gain or return of capital. The characterization
of the Parent Company’s dividends for 2020 consisted of a 74.174% ordinary income distribution, a 2.138% capital gain distribution and a
23.688% return of capital 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.
31
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.
Recent Sales of Unregistered Equity Securities and Use of Proceeds
Recent Sales of Operating Partnership Unregistered Equity Securities
On October 21, 2020, the Operating Partnership entered into an agreement to acquire a portfolio of eight open and operating self-
storage properties located in the outer boroughs of New York City for an aggregate purchase price of approximately $540.0 million, and
agreed to fund a portion of the acquisition price in the form of common units, designated Class B Units at the time of issuance. In two
separate tranches during December 2020, the Operating Partnership closed on the acquisition and funded approximately $175.1 million of
the acquisition price through the issuance of 5,272,023 common units. Following a 13-month lock-up period, the holders may tender the
common units for redemption by the Operating Partnership for a cash amount per common unit equal to the market value of an equivalent
number of common shares of the Company. The Company has the right, but not the obligation, to assume and satisfy the redemption
obligation of the Operating Partnership by issuing one common share in exchange for each common unit tendered for redemption. The
common units were sold to accredited investors unaffiliated with the Company in private placement transactions exempt from the
registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of such Act.
32
Share Performance Graph
The SEC requires us to present a chart comparing the cumulative total shareholder return, assuming reinvestment of dividends, 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 Index and (iii) the NAREIT All Equity REIT Index as provided by
NAREIT for the period beginning December 31, 2015 and ending December 31, 2020.
Index
CubeSmart
S&P 500 Index
Russell 2000 Index
NAREIT All Equity REIT Index
ITEM 6. SELECTED FINANCIAL DATA
Reserved.
For the year ended December 31,
2016
2015
100.00
90.16
100.00 111.96
100.00 121.31
100.00 108.63
2017
101.62
136.40
139.08
118.05
2018
105.06
130.42
123.76
113.28
2019
119.87
171.49
155.35
145.75
2020
133.82
203.04
186.36
138.28
33
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. Some of the statements we make in this section 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
We are 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 properties. The Parent Company’s operations are conducted solely through the
Operating Partnership and its subsidiaries. The Parent Company has elected to be taxed as a REIT for U.S. federal income tax purposes.
As of December 31, 2020 and December 31, 2019, we owned 543 self-storage properties totaling approximately 38.5 million rentable
square feet and 523 self-storage properties totaling approximately 36.6 million rentable square feet, respectively. As of December 31,
2020, we owned stores in the District of Columbia and the following 24 states: Arizona, California, Colorado, Connecticut, Florida,
Georgia, Illinois, Indiana, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio,
Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah and Virginia. In addition, as of December 31, 2020, we managed 723
stores for third parties (including 105 stores containing an aggregate of approximately 7.5 million net rentable square feet as part of five
separate unconsolidated real estate ventures), bringing the total number of stores we owned and/or managed to 1,266. As of December 31,
2020, we managed stores for third parties in the District of Columbia and the following 38 states: Alabama, Arizona, California, Colorado,
Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota,
Mississippi, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon,
Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington and Wisconsin.
We derive revenues principally from rents received from customers who rent cubes at our self-storage properties 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. Our approach to the management and operation of our
stores combines centralized marketing, revenue management and other operational support with local operations teams that provide
market-level oversight and management. We believe this approach allows us to respond quickly and effectively to changes in local market
conditions and maximize revenues by managing rental rates and occupancy levels.
We typically experience seasonal fluctuations in the occupancy levels of our stores, which are generally slightly higher during the
summer months due to increased moving activity.
Our results of operations may be sensitive to changes in overall economic conditions that impact consumer spending, including
discretionary spending and moving trends, as well as to increased bad debts due to recessionary pressures. 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.
We continue our focus on maximizing internal growth opportunities and selectively pursuing targeted acquisitions and developments of
self-storage properties.
We have one reportable segment: we own, operate, develop, manage and acquire self-storage properties.
Our self-storage properties are located in major metropolitan and suburban areas and have numerous customers per store. No single
customer represents a significant concentration of our revenues. Our stores in New York, Florida, Texas and California provided
approximately 16%, 15%, 9%, and 8%, respectively, of total revenues for the year ended December 31, 2020.
Summary of Critical Accounting Policies and Estimates
Set forth below is a summary of the accounting policies and estimates that management believes are critical to the preparation of the
consolidated financial statements included in this Report. 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
34
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, control 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.
Self-Storage Properties
The Company records self-storage properties at cost less accumulated depreciation. Depreciation on the buildings, improvements and
equipment is recorded on a straight-line basis over their estimated useful lives, which range from five to 39 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 stores are acquired, the purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on
estimated fair values.
In allocating the purchase price for an acquisition, the Company determines whether the acquisition includes intangible assets or
liabilities. The Company allocates a portion of the purchase price to an intangible asset attributable to the value of in-place leases. This
intangible asset is generally amortized to expense over the expected remaining term of the respective leases. Substantially all of the leases
in place at acquired stores 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 associated with storage leases assumed at acquisition.
Above- or below- market lease intangibles associated with assumed ground leases in which the Company serves as lessee are recorded as
an adjustment to the right-of-use asset and reflect the difference between the contractual amounts to be paid pursuant to each in-place
ground lease and management’s estimate of fair market lease rates. These amounts are amortized over the term of the lease. To date, no
intangible asset has been recorded for the value of customer relationships because the Company does not have any concentrations of
significant customers and the average customer 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 an 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 store’s basis is
recoverable. If a store’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.
There were no impairment losses recognized in accordance with these procedures during the years ended December 31, 2020, 2019 and
2018.
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 store (or group of stores), (b) the store is available for immediate sale in its present condition subject only to terms that are
usual and customary for sales of such stores, (c) an active program to locate a buyer and other actions required to complete the plan to sell
the store have been initiated, (d) the sale of the store is probable and transfer of the asset is expected to be completed within one year,
(e) the store 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.
35
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. Stores classified
as held for sale are reported at the lesser of carrying value or fair value less estimated costs to sell and are not depreciated. There were no
stores classified as held for sale as of December 31, 2020.
Investments in Unconsolidated Real Estate Ventures
The Company accounts for its investments in unconsolidated real estate ventures under the equity method of accounting when it is
determined that the Company has the ability to exercise significant influence over the venture. Under the equity method, investments in
unconsolidated real estate ventures are recorded initially at cost, as investments in real estate entities, and subsequently adjusted for equity
in earnings (losses) and cash contributions, less cash distributions and impairments. On a periodic basis, management also assesses
whether there are any indicators that the carrying 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 that is other than temporary 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. Fair value is determined through various valuation techniques, including but not limited to, discounted cash
flow models, quoted market values and third-party appraisals. There were no impairment losses related to the Company’s investments in
unconsolidated real estate ventures recognized during the years ended December 31, 2020, 2019 and 2018.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements affecting our business, see note 2 to the consolidated financial statements.
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 stores for each
period presented and should not be taken as indicative of future operations. We consider our same-store portfolio to consist of only those
stores owned and operated on a stabilized basis at the beginning and at the end of the applicable years presented. We consider a store to be
stabilized once it has achieved an occupancy rate that we believe, based on our assessment of market-specific data, is representative of
similar self-storage assets in the applicable market for a full year measured as of the most recent January 1 and has not been significantly
damaged by natural disaster or undergone significant renovation. We believe that same-store results are useful to investors in evaluating
our performance because they provide information relating to changes in store-level operating performance without taking into account the
effects of acquisitions, developments or dispositions. As of December 31, 2020, we owned 475 same-store properties and 68 non same-
store properties. All of the non same-store properties were 2019 and 2020 acquisitions, dispositions, developed stores, stores with a
significant portion of net rentable square footage taken out of service or stores that have not yet reached stabilization as defined above.
For analytical presentation, all percentages are calculated using the numbers presented in the financial statements contained in this Report.
The comparability of our results of operations is affected by the timing of acquisition and disposition activities during the periods
reported. As of December 31, 2020, 2019 and 2018, we owned 543, 523 and 493 self-storage properties and related assets, respectively.
36
The following table summarizes the change in number of owned stores from January 1, 2018 through December 31, 2020:
Balance - January 1
Stores acquired
Balance - March 31
Stores acquired
Stores developed
Stores combined (1)
Balance - June 30
Stores acquired
Stores developed
Balance - September 30
Stores acquired
Stores combined (1)
Stores sold
Balance - December 31
2020
2019
2018
523
1
524
2
1
—
527
—
—
527
18
(1)
(1)
543
493
1
494
21
2
(1)
516
2
1
519
5
—
(1)
523
484
1
485
1
—
—
486
3
1
490
5
—
(2)
493
(1) On May 24, 2019 and November 10, 2020, we acquired stores located in Tempe, AZ and Merritt Island, FL for approximately
$1.6 million and $3.9 million, respectively. In each case, the store acquired is located in near proximity to an existing wholly-
owned store. Given their proximity to each other, each acquired store has been combined with the existing store in our store
count, as well as for operational and reporting purposes.
Comparison of the Year Ended December 31, 2020 to the Year Ended December 31, 2019 (dollars in thousands)
Same-Store Property Portfolio
%
Non Same-Store
Properties
Other/
Eliminations
Total Portfolio
%
2020
2019
Change Change
2020
2019
2020
2019
2020
2019
Change
Change
$ 529,053
52,234
—
581,287
$ 522,477
54,470
—
576,947
$ 6,576
(2,236)
—
4,340
1.3 % $ 51,956
6,161
(4.1)%
—
0.0 %
58,117
0.8 %
$ 29,927
3,800
—
33,727
$
— $
12,328
27,445
39,773
— $ 581,009
70,723
27,445
679,177
9,288
23,953
33,241
$ 552,404
67,558
23,953
643,915
$ 28,605
3,165
3,492
35,262
5.2 %
4.7 %
14.6 %
5.5 %
173,585
407,702
169,540
407,407
4,045
295
2.4 %
0.1 %
20,955
37,162
14,506
19,221
29,094
10,679
25,693
7,548
223,634
455,543
209,739
434,176
13,895
21,367
6.6 %
4.9 %
475
33,196
475
33,196
93.4 %
93.2 %
91.2 %
92.2 %
$
17.10
$
17.07
68
5,348
48
3,408
85.3 %
73.5 %
543
38,544
523
36,604
92.3 %
89.5 %
REVENUES:
Rental income
Other property related income
Property management fee income
Total revenues
OPERATING EXPENSES:
Property operating expenses
NET OPERATING INCOME:
Store count
Total square footage
Period end occupancy (1)
Period average occupancy (2)
Realized annual rent per occupied sq. ft. (3)
Depreciation and amortization
General and administrative
Subtotal
OTHER (EXPENSE) INCOME
Interest:
Interest expense on loans
Loan procurement amortization expense
Loss on early extinguishment of debt
Equity in earnings of real estate ventures
Gains from sale of real estate, net
Other
Total other expense
NET INCOME
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
Noncontrolling interests in the Operating Partnership
Noncontrolling interests in subsidiaries
NET INCOME ATTRIBUTABLE TO THE COMPANY’S COMMON SHAREHOLDERS
(1) Represents occupancy as of December 31 of the respective year.
(2) Represents the weighted average occupancy for the period.
(3) Realized annual rent per occupied square foot is computed by dividing rental income by the weighted average occupied square feet for the period.
Revenues
Rental income increased from $552.4 million in 2019 to $581.0 million in 2020, an increase of $28.6 million, or 5.2%. The $6.6 million
increase in same-store rental income was due primarily to a 1.0% increase in average occupancy for 2020 compared to 2019. The
37
156,573
41,423
197,996
163,547
38,560
202,107
(6,974)
2,863
(4,111)
(4.3)%
7.4 %
(2.0)%
(75,890)
(2,674)
(18,020)
178
6,710
(240)
(89,936)
167,611
(72,525)
(2,819)
—
11,122
1,508
1,416
(61,298)
170,771
(3,365)
145
(18,020)
(10,944)
5,202
(1,656)
(28,638)
(3,160)
(4.6)%
5.1 %
— %
(98.4)%
345.0 %
(116.9)%
(46.7)%
(1.9)%
(1,825)
(165)
$ 165,621
(1,708)
54
$ 169,117
(117)
(219)
$ (3,496)
(6.9)%
(405.6)%
(2.1)%
remaining increase was primarily attributable to $22.0 million of additional rental income from the stores acquired or opened in 2019 and
2020 included in our non same-store portfolio.
Other property related income increased from $67.6 million in 2019 to $70.7 million in 2020, an increase of $3.2 million, or 4.7%. The
$2.2 million decrease in same-store other property related income was mainly attributable to a decrease in fee revenue due to the impact of
COVID-19. This decrease was offset by a $2.4 million increase in other property related income derived from the stores acquired or
opened in 2019 and 2020 included in our non same-store portfolio as well as a $3.0 million increase in other property related income at our
managed stores due to an increase in stores under management (723 stores as of December 31, 2020 compared to 649 stores as of
December 31, 2019).
Property management fee income increased from $24.0 million in 2019 to $27.4 million in 2020, an increase of $3.5 million, or 14.6%.
This increase was attributable to an increase in management fees related to the third-party management business resulting from the
increase in stores under management described above.
Operating Expenses
Property operating expenses increased from $209.7 million in 2019 to $223.6 million in 2020, an increase of $13.9 million, or 6.6%.
The $4.0 million increase in property operating expenses on the same-store portfolio was primarily due to increases in property taxes and
advertising costs of $2.1 million and $3.8 million, respectively, offset by decreases in personnel and maintenance costs of $1.6 million and
$0.4 million, respectively. The remainder of the increase was attributable to $6.4 million of increased expenses associated with newly
acquired or developed stores and $3.4 million of increased expenses associated with the growth in our third-party management program.
Depreciation and amortization decreased from $163.5 million in 2019 to $156.6 million in 2020, a decrease of $7.0 million, or 4.3%.
This decrease is primarily attributable to fully depreciated and amortized assets associated with acquisitions in prior years.
General and administrative expenses increased from $38.6 million in 2019 to $41.4 million in 2020, an increase of $2.9 million or 7.4%.
The change is primarily attributable to increased personnel expenses resulting from additional employee headcount to support our growth.
Other (expense) income
Interest expense increased from $72.5 million in 2019 to $75.9 million in 2020, an increase of $3.4 million, or 4.6%. The increase was
attributable to a higher amount of outstanding debt during 2020 compared to 2019. The average outstanding debt balance increased $182.1
million to $2,036.5 million during 2020 as compared to $1,854.4 million during 2019 as the result of borrowings to fund a portion of our
growth. The weighted average effective interest rate on our outstanding debt for 2020 and 2019 was 3.82% and 4.06%, respectively.
Loss on early extinguishment of debt was $18.0 million in 2020, which was related to the early redemption of $250.0 million of
outstanding 4.800% senior notes due 2022 (the “2022 Notes”), with no comparable amount in 2019. See Liquidity and Capital Resources
below.
Equity in earnings of real estate ventures decreased from $11.1 million in 2019 to $0.2 million in 2020. The change was mainly driven
by a prior year gain attributable to HVP III, a real estate venture in which we previously owned a 10% interest. Our $10.7 million share of
the gain was recorded in connection with HVP III’s sale of 50 properties during 2019.
Gains from sale of real estate, net were $6.7 million in 2020 compared to $1.5 million in 2019, an increase of $5.2 million. These gains
are determined on a transactional basis and, accordingly, are not comparable across reporting periods.
The component of other (expense) income designated as other decreased from income of $1.4 million in 2019 to expense of $0.2 million
in 2020, primarily due to fees earned in 2019 in connection with HVP III’s sale of 50 properties.
Comparison of the Year Ended December 31, 2019 to the Year Ended December 31, 2018
Refer to the section entitled “Results of Operations” within Item 7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2019 for a comparison of the year ended
December 31, 2019 to the year ended December 31, 2018.
38
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, other
expense, depreciation and amortization expense, general and administrative expense and deducting from net income (loss): gains from sale
of real estate, net, other income, gains from remeasurement of investments 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 stores, and for all of our stores 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 store managers to evaluate the economic productivity of our
stores, including our ability to lease our stores, 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
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,
as amended and restated, defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of real
estate and 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 our stores. Given the nature of our business as a
real estate owner and operator, we consider FFO a key measure of our operating performance that is not specifically defined by accounting
principles generally accepted in the United States. We believe that FFO is useful to management and investors as a starting point in
measuring our operational performance because FFO excludes various items included in net income that do not relate to or are not
indicative of our operating performance such as gains (or losses) from sales of real estate, gains from remeasurement of investments 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.
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.
39
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 non-recurring items, which we believe are not indicative of the Company’s operating results. We present FFO,
as adjusted because we believe it is a helpful measure in understanding our results of operations insofar as we believe that the items noted
above that are included in FFO, but excluded from FFO, as adjusted are not indicative of our ongoing operating results. We also believe
that the analyst community considers our FFO, as adjusted (or similar measures using different terminology) when evaluating us. Because
other REITs or real estate companies may not compute FFO, as adjusted in the same manner as we do, and may use different terminology,
our computation of FFO, as adjusted may not be comparable to FFO, as adjusted reported by other REITs or real estate companies.
The following table presents a reconciliation of net income to FFO and FFO, as adjusted, for the years ended December 31, 2020 and
2019:
Net income attributable to the Company’s common shareholders
$
165,621 $
169,117
For the year ended December 31,
2020
2019
Add (deduct):
Real estate depreciation and amortization:
Real property
Company’s share of unconsolidated real estate ventures
Gains from sale of real estate, net (1)
Noncontrolling interests in the Operating Partnership
FFO attributable to common shareholders and OP unitholders
Add:
Loss on early extinguishment of debt (2)
FFO, as adjusted, attributable to common shareholders and OP unitholders
Weighted average diluted shares outstanding
Weighted average diluted units outstanding
Weighted average diluted shares and units outstanding
152,897
7,430
(6,710)
1,825
321,063 $
160,485
7,052
(12,175)
1,708
326,187
$
18,020
339,083 $
141
326,328
$
194,943
2,137
197,080
191,576
1,886
193,462
(1) The year ended December 31, 2019 includes $10.7 million of gains from sale of real estate, net that are included in the
Company’s share of equity in earnings of real estate ventures.
(2) For the year ended December 31, 2020, loss on early extinguishment of debt relates to a $17.6 million prepayment premium and a
$0.4 million write-off of unamortized loan procurement costs associated with the Operating Partnership’s redemption, in full, of
its 2022 Notes on October 30, 2020.
Cash Flows
Comparison of the Year Ended December 31, 2020 to the Year Ended December 31, 2019
A comparison of cash flow related to operating, investing and financing activities for the years ended December 31, 2020 and 2019 is as
follows:
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
For the year ended December 31,
2020
2019
Change
(in thousands)
$
351,033
$ (511,441)
108,196
$
$
331,768 $ 19,265
$ (375,664) $ (135,777)
95,855 $ 12,341
$
Cash provided by operating activities for the years ended December 31, 2020 and 2019 was $351.0 million and $331.8 million,
respectively, reflecting an increase of $19.3 million. Our increased cash flow from operating activities was primarily attributable to stores
40
acquired and developed during 2019 and 2020, as well as increased management fees related to the third-party management business
resulting from more stores under management (723 stores as of December 31, 2020 compared to 649 stores as of December 31, 2019).
Cash used in investing activities increased from $375.7 million for the year ended December 31, 2019 to $511.4 million for the year
ended December 31, 2020, an increase of $135.8 million. The change was primarily driven by an increase in cash used for acquisitions of
storage properties. Cash used during the year ended December 31, 2020 included the acquisition of 21 stores and land for an aggregate net
purchase price of $415.9 million, net of $154.4 million of assumed debt and $175.1 million of OP units issued. Including the acquisition of
the remaining interest in HVP III, a previously unconsolidated real estate venture, cash used during the year ended December 31, 2019
related to the acquisition of 29 stores for an aggregate net purchase price of $238.3 million, net of $3.6 million of OP units
issued. Additionally, there was a $47.5 million decrease in development costs from the year ended December 31, 2019 compared to the
year ended December 31, 2020 resulting from the payment of put liabilities associated with three previously consolidated development
joint ventures during the 2019 period.
Cash provided by financing activities increased from $95.9 million for the year ended December 31, 2019 to $108.2 million for the year
ended December 31, 2020, an increase of $12.3 million. During the years ended December 31, 2020 and 2019, we received net proceeds
from unsecured senior notes of $445.8 million and $696.4 million, respectively, reflecting a decrease of $250.6 million that was primarily
due to the timing and size of each offering. During the year ended December 31, 2020, we made principal payments on our 2022 Notes of
$250.0 million with no comparable payments during 2019, and, additionally, there was a decrease of $75.6 million in proceeds received
from the issuance of common shares during 2020 compared to 2019, due to fewer common shares sold under our at-the-market equity
program in 2020 compared to 2019. During the year ended December 31, 2020, we also made principal payments on mortgage loans of
$46.1 million compared to $11.7 million during the year ended December 31, 2019, reflecting an increase of $34.4 million that is primarily
attributable to the repayment of three mortgage loans during 2020. These reductions in cash provided by financing activities were offset by
a $200.0 million cash payment made to repay our unsecured term loan in January 2019 with no comparable payment in 2020. In addition,
net borrowings on the revolving credit facility were $117.8 million during the year ended December 31, 2020 compared to net payments
of $299.5 million during the year ended December 31, 2019.
Comparison of the Year Ended December 31, 2019 to the Year Ended December 31, 2018
Refer to the section entitled “Cash Flows” within Item 7. “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2019 for a comparison of the year ended December
31, 2019 to the year ended December 31, 2018.
Liquidity and Capital Resources
Liquidity Overview
Our cash flow from operations has historically been one of our primary sources of liquidity used to fund debt service, distributions and
capital expenditures. We derive substantially all of our revenue from customers who lease space at our stores and fees earned from
managing stores. 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 properties in which we invest, self-storage properties, 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 its shareholders on an annual basis or pay federal income tax. The nature of our business, coupled with
the requirement that we distribute a substantial portion of our income on an annual basis, will cause us to have substantial liquidity needs
over both the short and long term.
Our short-term liquidity needs consist primarily of funds necessary to pay operating expenses associated with our stores, refinancing of
certain mortgage indebtedness, interest expense and scheduled principal payments on debt, expected distributions to limited partners and
shareholders, capital expenditures and the development of new stores. These funding requirements will vary from year to year, in some
cases significantly. In the 2021 fiscal year, we expect recurring capital expenditures to be approximately $11.0 million to $16.0 million,
planned capital improvements and store upgrades to be approximately $10.5 million to $15.5 million and costs associated with the
development of new stores to be approximately $34.0 million to $49.0 million. Our currently scheduled principal payments on debt are
approximately $46.4 million in 2021.
41
Our most restrictive financial covenants limit the amount of additional leverage we can add; however, we believe cash flows from
operations, access to equity financing, including through our at-the-market equity program and available borrowings under our Revolver
provide adequate sources of liquidity to enable us to execute our current business plan and remain in compliance with our covenants.
Our liquidity needs beyond 2021 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 stores;
(iii) acquisitions of additional stores; and (iv) development of new stores. We will have to satisfy the portion of our needs not covered by
cash flow from operations through additional borrowings, including borrowings under our Revolver, sales of common or preferred shares
of the Parent Company and common or preferred units of the Operating Partnership and/or cash generated through store dispositions and
joint venture transactions.
We believe that, as a publicly traded REIT, we will have access to multiple sources of capital to fund our 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, 2020, we had approximately $3.6 million in available cash and cash equivalents. In addition, we had approximately
$631.6 million of availability for borrowings under the revolving portion of our Amended and Restated Credit Facility (defined below).
Unsecured Senior Notes
On October 6, 2020, we issued $450.0 million in aggregate principal amount of unsecured senior notes due February 15, 2031, which
bear interest at a rate of 2.000% per annum (the “2031 Notes”). The 2031 Notes were priced at 99.074% of the principal amount to yield
2.100% at maturity. Net proceeds from the offering were used to repay, in full, $250.0 million of outstanding 4.800% senior notes due in
July 2022. The remaining proceeds from the offering were used to repay all of the outstanding indebtedness under the revolving portion of
our Credit Facility (defined below) and for working capital and other general corporate purposes.
Our unsecured senior notes are summarized as follows (collectively referred to as the “Senior Notes”):
December 31,
2020
2019
Effective
Interest Rate
Issuance
Date
Maturity
Date
Unsecured Senior Notes
$250M 4.800% Guaranteed Notes due 2022 (1)
$300M 4.375% Guaranteed Notes due 2023 (2)
$300M 4.000% Guaranteed Notes due 2025 (3)
$300M 3.125% Guaranteed Notes due 2026
$350M 4.375% Guaranteed Notes due 2029
$350M 3.000% Guaranteed Notes due 2030
$450M 2.000% Guaranteed Notes due 2031
Principal balance outstanding
$
300,000
300,000
300,000
350,000
350,000
450,000
2,050,000
(in thousands)
— $
250,000
300,000
300,000
300,000
350,000
350,000
—
1,850,000
Jun-12
4.82 %
4.33 % Various (2)
3.99 % Various (3)
Aug-16
3.18 %
Jan-19
4.46 %
Oct-19
3.04 %
Oct-20
2.10 %
Jul-22
Dec-23
Nov-25
Sep-26
Feb-29
Feb-30
Feb-31
Less: Discount on issuance of unsecured senior notes,
net
Less: Loan procurement costs, net
Total unsecured senior notes, net
(7,470)
(12,158)
(3,860)
(10,415)
$ 2,030,372 $ 1,835,725
(1) On October 30, 2020, the Operating Partnership redeemed, in full, the 2022 Notes, with proceeds from its $450.0 million
of 2.000% senior notes due 2031 issued on October 6, 2020. In connection with the redemption of the 2022 Notes, the Operating
Partnership recognized a loss on early debt extinguishment of $18.0 million, of which $17.6 million represents a prepayment
premium and $0.4 represents the write-off of unamortized loan procurement costs.
(2) On April 4, 2017, the Operating Partnership issued $50.0 million of its 4.375% senior notes due 2023, which are part of the same
series as the $250.0 million principal amount of the Operating Partnership’s 4.375% senior notes due December 15, 2023 issued
on December 17, 2013. The $50.0 million and $250.0 million tranches were priced at 105.040% and 98.995%, respectively, of
42
the principal amount to yield 3.495% and 4.501%, respectively, to maturity. The combined weighted average effective interest
rate of the 2023 notes is 4.330%.
(3) On April 4, 2017, the Operating Partnership issued $50.0 million of its 4.000% senior notes due 2025, which are part of the same
series as the $250.0 million principal amount of the Operating Partnership’s 4.000% senior notes due November 15, 2025 issued
on October 26, 2015. The $50.0 million and $250.0 million tranches were priced at 101.343% and 99.735%, respectively, of the
principal amount to yield 3.811% and 4.032%, respectively, to maturity. The combined weighted average effective interest rate of
the 2025 notes is 3.994%.
The indenture under which the 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 more than 1.5:1.0 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. As of and for the year ended December 31, 2020, the
Operating Partnership was in compliance with all of the financial covenants under the Senior Notes.
Revolving Credit Facility and Unsecured Term Loans
On December 9, 2011, we entered into a credit agreement (the “Credit Facility”), which was subsequently amended on April 5, 2012,
June 18, 2013 and April 22, 2015 to provide for, among other things, a $500.0 million unsecured revolving facility with a maturity date of
April 22, 2020. On June 19, 2019, we amended and restated, in its entirety, the Credit Facility (the “Amended and Restated Credit
Facility”) which, subsequent to the amendment and restatement, is comprised of a $750.0 million unsecured revolving credit facility (the
“Revolver”) maturing on June 19, 2024. Under the Amended and Restated Credit Facility, pricing on the Revolver is dependent upon our
unsecured debt credit ratings. At our current Baa2/BBB level, amounts drawn under the Revolver are priced at 1.10% over LIBOR,
inclusive of a facility fee of 0.15%. We incurred costs of $3.9 million in 2019 in connection with amending and restating the Credit
Facility and capitalized such costs as a component of Loan procurement costs, net of amortization on the consolidated balance sheets.
On January 31, 2019, we used a portion of the net proceeds from the issuance of $350.0 million of 4.375% Senior Notes due 2029 (the
“2029 Notes”) to repay all of the outstanding indebtedness under the $200.0 million unsecured term loan portion of the Credit Facility.
As of December 31, 2020, borrowings under the Revolver had an effective weighted average interest rate of 1.24%. Additionally, as of
December 31, 2020, $631.6 million was available for borrowing under the Revolver. The available balance under the Revolver is reduced
by an outstanding letter of credit of $0.6 million.
Under the Amended and Restated Credit Facility, our ability to borrow under the Revolver is subject to ongoing compliance with certain
financial covenants which include, among other things, (1) a maximum total indebtedness to total asset value of 60.0%, and (2) a
minimum fixed charge coverage ratio of 1.5:1.0. As of and for the year ended December 31, 2020, the Operating Partnership was in
compliance with all of its financial covenants.
On June 20, 2011, we entered into an unsecured term loan agreement (the “Term Loan Facility”), which was subsequently amended on
June 18, 2013 and August 5, 2014, consisting of, among other things, a $100.0 million unsecured term loan that was scheduled to mature
in January 2020. On June 19, 2019, we used an initial advance at closing of the Amended and Restated Credit Facility to repay all of the
outstanding indebtedness under the unsecured term loan portion of the Term Loan Facility. Unamortized loan procurement costs
of $0.1 million were written off in conjunction with the repayment
Issuance of Common Shares
We maintain an at-the-market equity program that enables us to offer and sell up to 60.0 million common shares through sales agents
pursuant to equity distribution agreements (the “Equity Distribution Agreements”). Our sales activity under the program for the years
ended December 31, 2020, 2019 and 2018 is summarized below:
Number of shares sold
Average sales price per share
Net proceeds after deducting offering costs
$
$
3,627
33.69 $
120,727 $
5,899
33.64 $
196,304 $
4,291
31.09
131,835
43
For the year ended December 31,
2019
(dollars and shares in thousands, except per share amounts)
2020
2018
We used proceeds from sales of common shares under the program during the years ended December 31, 2020, 2019 and 2018 to fund
acquisitions of storage properties and for general corporate purposes. As of December 31, 2020, 2019 and 2018, 10.9 million common
shares, 4.6 million common shares and 10.5 million common shares, respectively, remained available for issuance under the Equity
Distribution Agreements.
Other Material Changes in Financial Position
Selected Assets
Storage properties, net
Other assets, net
Selected Liabilities
Unsecured senior notes, net
Revolving credit facility
Mortgage loans and notes payable, net
Lease liabilities - finance leases
December 31,
2020
2019
(in thousands)
Change
$
4,505,814
170,753
$
3,774,485
101,443
$
2,030,372
117,800
216,504
65,599
$
1,835,725
—
96,040
—
$
$
731,329
69,310
194,647
117,800
120,464
65,599
Noncontrolling interests in the Operating Partnership
$
249,414
$
62,088
$
187,326
Storage properties, net increased $731.3 million from December 31, 2019 to December 31, 2020, primarily as a result of the acquisition
of 21 storage properties, additions and improvements to storage properties, and development costs incurred during the year.
Other assets, net increased $69.3 million from December 31, 2019 to December 31, 2020, primarily due to the value assigned to the in-
place leases at the 21 storage properties acquired during the year and the right-of-use asset associated with the assumption of a ground
lease in connection with the acquisition of the Storage Deluxe Assets that was classified as an operating lease.
Unsecured senior notes, net increased $194.6 million from December 31, 2019 to December 31, 2020 as a result of the issuance of the
2031 Notes on October 6, 2020 offset by the redemption of the 2022 Notes on October 30, 2020.
Revolving credit facility increased $117.8 million from December 31, 2019 to December 31, 2020 primarily as a result of borrowings
used to fund the acquisitions of 21 storage properties, additions and improvements to storage properties, and development costs incurred
during the year.
Mortgage loans and notes payable, net increased $120.5 million from December 31, 2019 to December 31, 2020 primarily due to the
assumption of six mortgage loans, one of which was repaid immediately upon assumption, in connection with the acquisition of a portfolio
of eight stores located in the outer boroughs of New York City (the “Storage Deluxe Assets”).
Lease liabilities – finance leases increased $65.6 million from December 31, 2019 to December 31, 2020 due to the assumption of two
ground leases in connection with the acquisition of the Storage Deluxe Assets.
Noncontrolling interests in the Operating Partnership increased $187.3 million from December 31, 2019 to December 31, 2020,
primarily due to the issuance of OP Units in connection with the acquisition of the Storage Deluxe Assets and the acquisition of the
noncontrolling interest in a joint venture that developed a store located in Brooklyn, NY.
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
Our future income, cash flows and fair values relevant to financial instruments depend upon prevailing market interest rates.
44
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 of 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 interest 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 interest rates chosen.
As of December 31, 2020 our consolidated debt consisted of $2,252.8 million of outstanding mortgage loans and notes payable and
unsecured senior notes that are subject to fixed rates. Additionally, as of December 31, 2020, there were $117.8 million of outstanding
unsecured credit facility borrowings subject to floating rates. Changes in market interest rates have different impacts on the fixed- and
variable-rate portions of our debt portfolio. A change in market 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 market 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 interest rates 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 $1.2 million a year. If market interest rates 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 $1.2 million a year.
If market interest rates increase by 100 basis points, the fair value of our outstanding fixed-rate mortgage debt and unsecured senior
notes would decrease by approximately $143.0 million. If market interest rates decrease by 100 basis points, the fair value of our
outstanding fixed-rate mortgage debt and unsecured senior notes would increase by approximately $161.8 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.
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 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.
45
Changes in Internal Control 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 of the Parent Company is set forth on page F-2 of this Report, and is
incorporated herein by reference. The effectiveness of the Parent Company’s internal control over financial reporting as of December 31,
2020 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 Control 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.
Management’s Report on Internal Control Over Financial Reporting
Management’s report on internal control over financial reporting of the Operating Partnership is set forth on page F-3 of this Report, and
is incorporated herein by reference. The effectiveness of the Operating Partnership’s internal control over financial reporting as of
December 31, 2020 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 Parent Company’s Proxy Statement for the Annual Shareholders Meeting to be held in 2021
(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 2021 Annual Meeting.” The information required by this item
46
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 “Delinquent Section 16(a) Reports.”
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,” “Severance Plan
and 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, 2020.
Plan Category
Equity compensation plans approved by shareholders
Equity compensation plans not approved by shareholders
Total
Number of securities to Weighted average
be issued upon exercise
exercise price of
of outstanding options, outstanding options,
warrants and rights
warrants and rights
(b)
Number of securities remaining
available for future issuance under
equity compensation plans
(excluding securities
reflected in column(a))
(c)
(a)
2,118,090 $
—
2,118,090 $
26.37 (1)
—
26.37
3,233,009
—
3,233,009
(1) This number reflects the weighted average exercise price of outstanding options and has been calculated exclusive of outstanding
restricted unit awards.
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 Parent Company’s 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.
47
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*
3.8*
3.9*
3.10*
3.11*
3.12*
4.1*
4.2*
4.3*
Articles of Amendment to the Declaration of Trust of CubeSmart, incorporated by reference to Exhibit 99.1 to the
Company’s Current Report on Form 8-K, filed on May 28, 2015.
Articles of Restatement of the Declaration of Trust of CubeSmart, incorporated by reference to Exhibit 99.2 to the
Company’s Current Report on Form 8-K, filed on May 28, 2015.
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, 2011.
Articles of Amendment to the Declaration of Trust of CubeSmart, incorporated by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K, filed on November 3, 2016.
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, 2011.
Amendment No. 1 to Certificate of Limited Partnership of CubeSmart, L.P., dated September 14, 2011, incorporated by
reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K, filed on September 16, 2011.
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.
Amendment No. 1 to Second Amended and Restated Agreement of Limited Partnership of CubeSmart, L.P. dated as of
September 14, 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.
Class C Unit Supplement No. 1 to Second Amended and Restated Agreement of Limited Partnership of CubeSmart, L.P.
dates as of April 12, 2017, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on
April 18, 2017.
Articles of Amendment to the Declaration of Trust of CubeSmart, incorporated by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K, filed on June 2, 2017.
Fourth Amended and Restated Bylaws of CubeSmart, effective August 5, 2020, incorporated by reference to Exhibit 3.1 to
the Company’s Quarterly Report on Form 10-Q, filed on August 7, 2020.
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.
48
4.4*
4.5*
4.6*
4.7*
4.8*
4.9*
4.10*
4.11*
4.12*
4.13*
4.14*
4.15*
4.16*
4.17*
4.18*
4.19*
4.20*
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.
Second Supplemental Indenture, dated as of December 17, 2013, 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 December 17, 2013.
Form of $250 million aggregate principal amount of 4.375% senior notes due December 15, 2023, incorporated herein by
reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed on December 17, 2013.
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 December 17, 2013.
Third Supplemental Indenture, dated as of October 26, 2015, among CubeSmart, CubeSmart, L.P. and U.S. Bank National
Association, incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on October 26,
2015.
Form of $250 million aggregate principal amount of 4.000% senior note due November 15, 2025, incorporated by reference
to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed on October 26, 2015.
Fourth Supplemental Indenture, dated as of August 15, 2016, among CubeSmart, CubeSmart, L.P. 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 August
15, 2016.
Form of $300 million aggregate principal amount of 3.125% senior notes due September 1, 2026, incorporated herein by
reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed on August 15, 2016.
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 August 15, 2016.
Form of $50 million aggregate principal amount of 4.375% senior notes due December 15, 2023, incorporated herein by
reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on April 5, 2017.
Form of $50 million aggregate principal amount of 4.000% senior notes due November 15, 2025, incorporated herein by
reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K, filed on April 5, 2017.
Fifth Supplemental Indenture, dated as of April 4, 2017, among CubeSmart, CubeSmart, L.P. and U.S. Bank National
Association, incorporated herein by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K, filed on April 5,
2017.
Form of $350 million aggregate principal amount of 4.375% senior notes due February 15, 2029, incorporated herein by
reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on January 30, 2019.
Sixth Supplemental Indenture, dated as of January 30, 2019, among CubeSmart, CubeSmart, L.P. and U.S. Bank National
Association, incorporated herein by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K, filed on January
30, 2019.
Form of $350 million aggregate principal amount of 3.000% senior notes due February 15, 2030, incorporated herein by
reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on October 11, 2019.
Form of CubeSmart Notation of Guarantee, incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report
on Form 8-K, filed on October 11, 2019.
Seventh Supplemental Indenture, dated of as October 11, 2019, among CubeSmart, CubeSmart, L.P. and U.S. Bank National
Association, incorporated herein by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K, filed on October
11, 2019.
49
4.21*
4.22*
4.23*
4.24*
10.1*†
10.2*†
10.3*†
Form of $450 million aggregate principal amount of 2.000% senior notes due February 15, 2031, incorporated herein by
reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on October 6, 2020.
Form of CubeSmart Guarantee, incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-
K, filed on October 6, 2020.
Eighth Supplemental Indenture, dated of as October 6, 2020, among CubeSmart, CubeSmart, L.P. and U.S. Bank National
Association, incorporated herein by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K, filed on October
6, 2020.
Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934,
incorporated herein by reference to Exhibit 4.23 to the Company’s Annual Report on Form 10-K, filed on February 21, 2020.
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 Christopher P. Marr, Timothy M. Martin, Jeffrey P.
Foster, Joel D. Keaton, Piero Bussani, Dorothy Dowling, John W. Fain, Marianne M. Keler, John F. Remondi, Jeffrey F.
Rogatz and Deborah R. Salzberg), incorporated by reference to Exhibit 10.19 to the Company’s Current Report on Form 8-
K, filed on November 2, 2004.
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.
10.4*†
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.
10.5*†
10.6*†
10.7*†
10.8*†
10.9*†
10.10*†
10.11*†
10.12*†
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.
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.
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.
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.
Form of Restricted Share Agreement under the CubeSmart 2007 Equity Incentive Plan, incorporated herein by reference to
Exhibit 10.42 to the Company’s Annual Report on Form 10-K, filed on February 28, 2013.
Form of Non-Qualified Share Option Agreement under the CubeSmart 2007 Equity Incentive Plan, incorporated herein by
reference to Exhibit 10.43 to the Company’s Annual Report on Form 10-K, filed on February 28, 2013.
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.
50
10.13*†
10.14*†
10.15*
10.16*†
10.17*†
Form of Restricted Share Unit Award Agreement (2-Year Vesting) under the CubeSmart 2007 Equity Incentive Plan,
incorporated herein by reference to Exhibit 10.47 to the Company’s Annual Report on Form 10-K, filed on February 28,
2013.
Form of Performance-Vested Restricted Share Unit Award Agreement under the CubeSmart 2007 Equity Incentive Plan,
incorporated herein by reference to Exhibit 10.48 to the Company’s Annual Report on Form 10-K, filed on February 28,
2013.
Waiver of Ownership Limitation, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-
Q for the quarter ended March 31, 2013, filed on May 6, 2013.
Advisory Agreement, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2013, filed on November 8, 2013.
Form of Non-Qualified Share Option Agreement for Executive Officers (3-Year Vesting) under the CubeSmart 2007 Equity
Incentive Plan, incorporated by reference to Exhibit 10.58 to the Company’s Annual Report on Form 10-K, filed on
February 28, 2014.
10.18*†
Form of Non-Qualified Share Option Agreement (3-Year Vesting) under the CubeSmart 2007 Equity Incentive Plan,
incorporated by reference to Exhibit 10.59 to the Company’s Annual Report on Form 10-K, filed on February 28, 2014.
10.19*†
Form of Performance Share Award Agreement for Executive Officers (3-Year Vesting) under the CubeSmart 2007 Equity
Incentive Plan, incorporated by reference to Exhibit 10.60 to the Company’s Annual Report on Form 10-K, filed on
February 28, 2014.
10.20*†
Form of Performance Share Award Agreement (3-Year Vesting) under the CubeSmart 2007 Equity Incentive Plan,
incorporated by reference to Exhibit 10.61 to the Company’s Annual Report on Form 10-K, filed on February 28, 2014.
10.21*†
Form of Restricted Share Award Agreement for Executive Officers (3-Year Vesting) under the CubeSmart 2007 Equity
Incentive Plan, incorporated by reference to Exhibit 10.63 to the Company’s Annual Report on Form 10-K, filed on
February 28, 2014.
10.22*†
Form of Restricted Share Award Agreement (3-Year Vesting) under the CubeSmart 2007 Equity Incentive Plan, incorporated
by reference to Exhibit 10.64 to the Company’s Annual Report on Form 10-K, filed on February 28, 2014.
10.23*†
Form of Restricted Share Award Agreement (5-Year Vesting) under the CubeSmart 2004 Equity Incentive Plan, incorporated
by reference to Exhibit 10.65 to the Company’s Annual Report on Form 10-K, filed on February 28, 2014.
10.24*†
10.25*†
10.26*†
10.27*†
10.28*†
Amended and Restated CubeSmart 2007 Equity Incentive Plan, effective June 1, 2016, incorporated by reference to
Appendix A to the Company’s Definitive Proxy Statement, filed on April 14, 2016.
CubeSmart Executive Severance Plan, effective January 1, 2017, incorporated by reference to Exhibit 99.1 to the Company’s
Current Report on Form 8-K, filed on November 4, 2016.
Form of Non-Qualified Share Option Agreement for Executive Officers (3-Year Vesting) under the CubeSmart 2007 Equity
Incentive Plan, as amended and restated, effective June 1, 2016, incorporated by reference to Exhibit 10.42 to the Company’s
Annual Report on Form 10-K, filed on February 17, 2017.
Form of Non-Qualified Share Option Agreement (3-Year Vesting) under the CubeSmart 2007 Equity Incentive Plan, as
amended and restated, effective June 1, 2016, incorporated by reference to Exhibit 10.43 to the Company’s Annual Report on
Form 10-K, filed on February 17, 2017.
Form of Restricted Share Award Agreement for Executive Officers (3-Year Vesting) under the CubeSmart 2007 Equity
Incentive Plan, as amended and restated, effective June 1, 2016, incorporated by reference to Exhibit 10.44 to the Company’s
Annual Report on Form 10-K, filed on February 17, 2017.
51
10.29*†
10.30*†
10.31*†
10.32*†
10.33*†
10.34*†
10.35*†
10.36*†
10.37*†
10.38*†
10.39*†
10.40*
10.41*
10.42*
Form of Restricted Share Award Agreement (3-Year Vesting) under the CubeSmart 2007 Equity Incentive Plan, as amended
and restated, effective June 1, 2016, incorporated by reference to Exhibit 10.45 to the Company’s Annual Report on Form
10-K, filed on February 17, 2017.
Form of Restricted Share Award Agreement (5-Year Vesting) under the CubeSmart 2007 Equity Incentive Plan, as amended
and restated, effective June 1, 2016, incorporated by reference to Exhibit 10.46 to the Company’s Annual Report on Form
10-K, filed on February 17, 2017.
Form of Restricted Share Unit Award Agreement for Executive Officers (3-Year Vesting) under the CubeSmart 2007 Equity
Incentive Plan, as amended and restated, effective June 1, 2016, incorporated by reference to Exhibit 10.47 to the Company’s
Annual Report on Form 10-K, filed on February 17, 2017.
Form of Restricted Share Unit Award Agreement (3-Year Vesting) under the CubeSmart 2007 Equity Incentive Plan, as
amended and restated, effective June 1, 2016, incorporated by reference to Exhibit 10.48 to the Company’s Annual Report on
Form 10-K, filed on February 17, 2017.
Form of Performance-Vested Restricted Share Award Agreement for Executive Officers (3-Year Vesting) under the
CubeSmart 2007 Equity Incentive Plan, as amended and restated, effective June 1, 2016, incorporated by reference to Exhibit
10.49 to the Company’s Annual Report on Form 10-K, filed on February 17, 2017.
Form of Performance-Vested Restricted Share Award Agreement (3-Year Vesting) under the CubeSmart 2007 Equity
Incentive Plan, as amended and restated, effective June 1, 2016, incorporated by reference to Exhibit 10.50 to the Company’s
Annual Report on Form 10-K, filed on February 17, 2017.
Form of Performance-Vested Restricted Share Unit Award Agreement for Executive Officers (3-Year Vesting) under the
CubeSmart 2007 Equity Incentive Plan, as amended and restated, effective June 1, 2016, incorporated by reference to Exhibit
10.51 to the Company’s Annual Report on Form 10-K, filed on February 17, 2017.
Form of Performance-Vested Restricted Share Unit Award Agreement (3-Year Vesting) under the CubeSmart 2007 Equity
Incentive Plan, as amended and restated, effective June 1, 2016, incorporated by reference to Exhibit 10.52 to the Company’s
Annual Report on Form 10-K, filed on February 17, 2017.
Form of Restricted Share Agreement under the CubeSmart 2007 Equity Incentive Plan, as amended and restated, effective
June 1, 2016, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed on January 3,
2019.
Form of Non-Qualified Share Option Agreement under the CubeSmart 2007 Equity Incentive Plan, as amended and restated,
effective June 1, 2016, incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K, filed on
January 3, 2019.
Form of Performance-Vested Restricted Share Agreement under the CubeSmart 2007 Equity Incentive Plan, as amended and
restated, effective June 1, 2016, incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K,
filed on January 3, 2019.
Amended and Restated Credit Agreement, dated as of June 19, 2019, by and among CubeSmart, L.P., CubeSmart, the
lenders referred to therein, and Wells Fargo Bank, National Association, as administrative agent for the Lenders,
incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on June 21, 2019.
Second Amended and Restated Equity Distribution Agreement, dated March 4, 2020, by and among CubeSmart, CubeSmart,
L.P. and Wells Fargo Securities, LLC, incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-
K, filed on March 4, 2020.
Second Amended and Restated Equity Distribution Agreement, dated March 4, 2020, by and among CubeSmart, CubeSmart,
L.P. and BofA Securities, Inc., incorporated by reference to Exhibit 1.2 to the Company’s Current Report on Form 8-K, filed
on March 4, 2020.
52
10.43*
10.44*
10.45*
21.1
23.1
23.2
31.1
31.2
31.3
31.4
32.1
32.2
99.1
101
Second Amended and Restated Equity Distribution Agreement, dated March 4, 2020, by and among CubeSmart, CubeSmart,
L.P. and BMO Capital Markets Corp., incorporated by reference to Exhibit 1.3 to the Company’s Current Report on Form 8-
K, filed on March 4, 2020.
Second Amended and Restated Equity Distribution Agreement, dated March 4, 2020, by and among CubeSmart, CubeSmart,
L.P. and Jefferies LLC, incorporated by reference to Exhibit 1.4 to the Company’s Current Report on Form 8-K, filed on
March 4, 2020.
Second Amended and Restated Equity Distribution Agreement, dated March 4, 2020, by and among CubeSmart, CubeSmart,
L.P. and Barclays Capital Inc., incorporated by reference to Exhibit 1.5 to the Company’s Current Report on Form 8-K, filed
on March 4, 2020.
List of Subsidiaries.
Consent of KPMG LLP relating to financial statements of CubeSmart.
Consent of KPMG LLP relating to financial statements of CubeSmart, L.P.
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.
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.
Material United States Federal Income Tax Considerations.
The following CubeSmart and CubeSmart, L.P. financial information for the year ended December 31, 2020, formatted in
Inline 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.
104
Cover Page Interactive Data File – embedded within the Inline XBRL document (included as Exhibit 101).
*
†
Incorporated herein by reference as above indicated.
Denotes a management contract or compensatory plan, contract or arrangement.
ITEM 16. FORM 10-K SUMMARY
None.
53
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, 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 26, 2021
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, 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/ Marianne M. Keler
Marianne M. Keler
/s/ Christopher P. Marr
Christopher P. Marr
/s/ Timothy M. Martin
Timothy M. Martin
/s/ Piero Bussani
Piero Bussani
/s/ Dorothy Dowling
Dorothy Dowling
/s/ John W. Fain
John W. Fain
/s/ John F. Remondi
John F. Remondi
/s/ Jeffrey F. Rogatz
Jeffrey F. Rogatz
/s/ Deborah Ratner Salzberg
Deborah Ratner Salzberg
Chair of the Board of Trustees
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
Chief Executive Officer and Trustee
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
54
FINANCIAL STATEMENTS
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements of CUBESMART and CUBESMART, L.P. (the “Company”)
Page No.
Management’s Report on CubeSmart Internal Control Over Financial Reporting
Management’s Report on CubeSmart, L.P. Internal Control Over Financial Reporting
Reports of Independent Registered Public Accounting Firm
CubeSmart and Subsidiaries Consolidated Balance Sheets as of December 31, 2020 and 2019
CubeSmart and Subsidiaries Consolidated Statements of Operations for the years ended December 31, 2020,
2019 and 2018
CubeSmart and Subsidiaries Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31,
2020, 2019 and 2018
CubeSmart and Subsidiaries Consolidated Statements of Equity for the years ended December 31, 2020, 2019 and 2018
CubeSmart and Subsidiaries Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019
and 2018
CubeSmart, L.P. and Subsidiaries Consolidated Balance Sheets as of December 31, 2020 and 2019
CubeSmart, L.P. and Subsidiaries Consolidated Statements of Operations for the years ended December 31, 2020, 2019
and 2018
CubeSmart, L.P. and Subsidiaries Consolidated Statements of Comprehensive Income (Loss) for the years
ended December 31, 2020, 2019 and 2018
CubeSmart, L.P. and Subsidiaries Consolidated Statements of Capital for the years ended December 31, 2020, 2019
and 2018
CubeSmart, L.P. and Subsidiaries Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019
and 2018
Notes to Consolidated Financial Statements
F-2
F-3
F-4
F-10
F-11
F-12
F-13
F-14
F-15
F-16
F-17
F-18
F-19
F-20
F-1
MANAGEMENT’S REPORT ON CUBESMART INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of CubeSmart (the “REIT”) 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
REIT’s management is required to assess the effectiveness of the REIT’s internal control over financial reporting as of the end of each
fiscal year, and report on the basis of that assessment whether the REIT’s internal control over financial reporting is effective.
The REIT’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 REIT’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 REIT;
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 REIT are being
made only in accordance with the authorization of the REIT’s management and its Board of Trustees; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
REIT’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 REIT’s management, including the principal executive officer and principal
financial officer, management conducted a review, evaluation and assessment of the effectiveness of our internal control over financial
reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). In performing its assessment of the effectiveness of
internal control over financial reporting, management has concluded that, as of December 31, 2020, the REIT’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, 2020, has been audited by KPMG LLP, an
independent registered public accounting firm, as stated in their report that appears herein.
February 26, 2021
F-2
MANAGEMENT’S REPORT ON CUBESMART, L.P. INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of CubeSmart, L.P. (the “Partnership”) 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 Partnership’s management is required to assess the effectiveness of the Partnership’s internal control over financial reporting as
of the end of each fiscal year, and report on the basis of that assessment whether the Partnership’s internal control over financial reporting
is effective.
The Partnership’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 Partnership’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 Partnership;
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 Partnership are
being made only in accordance with the authorization of the Partnership’s management and its Board of Trustees; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
Partnership’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 Partnership’s management, including the principal executive officer and
principal financial officer, management conducted a review, evaluation and assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In performing its assessment of the effectiveness of
internal control over financial reporting, management has concluded that, as of December 31, 2020, the Partnership’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, 2020, has been audited by KPMG LLP, an
independent registered public accounting firm, as stated in their report that appears herein.
February 26, 2021
F-3
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees
CubeSmart:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of CubeSmart and subsidiaries (the Company) as of December 31, 2020
and 2019, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the years in
the three-year period ended December 31, 2020, and the related notes and financial statement schedule III (collectively, the consolidated
financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year
period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control –
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated
February 26, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of
January 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or
fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material
to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Evaluation of storage properties for impairment
As discussed in notes 2 and 3 to the consolidated financial statements, the Company had $4.5 billion of storage properties, net of
accumulated depreciation as of December 31, 2020. The Company performs an impairment assessment whenever events or
changes in circumstances indicate that there may be an impairment. This involves comparing the undiscounted future net
operating cash flows plus a terminal value to the carrying amount of the storage property.
We identified the evaluation of storage properties for impairment as a critical audit matter. The Company uses revenue and
expense growth rates, and terminal value capitalization rate assumptions in determining estimated future cash flows as part of its
impairment assessment. Changes to these assumptions could have a significant impact on the determination of recoverability of
the carrying amount of a storage property and involved subjective auditor judgement.
F-4
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested
the operating effectiveness of certain internal controls over the Company’s storage property impairment process, including
controls related to the use of the revenue and expense growth rates, and terminal value capitalization rate. We assessed the
Company’s forecasted growth rates against the Company’s historical growth rates and published reports of industry data. We
evaluated the Company’s expected terminal value capitalization rates by comparing them to published reports of industry data
and historical transactions of the Company. We also identified the threshold rates at which the revenue and expense growth rates
and terminal value capitalization rate assumptions would indicate the storage property may be impaired and analyzed those
threshold rates against the published industry data and historical results.
/s/ KPMG LLP
We have served as the Company’s auditor since 2009.
Philadelphia, Pennsylvania
February 26, 2021
F-5
Report of Independent Registered Public Accounting Firm
To the Partners of CubeSmart, L.P. and the Board of Trustees of CubeSmart:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of CubeSmart, L.P. and subsidiaries (the Partnership) as of December 31,
2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), capital, and cash flows for each of the
years in the three-year period ended December 31, 2020, and the related notes and financial statement schedule III (collectively, the
consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Partnership as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in
the three-year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Partnership’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control –
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated
February 26, 2021 expressed an unqualified opinion on the effectiveness of the Partnership’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Partnership has changed its method of accounting for leases as of
January 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.
Basis for Opinion
These consolidated financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or
fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material
to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Evaluation of storage properties for impairment
As discussed in notes 2 and 3 to the consolidated financial statements, the Partnership had $4.5 billion of storage properties, net
of accumulated depreciation as of December 31, 2020. The Partnership performs an impairment assessment whenever events or
changes in circumstances indicate that there may be an impairment. This involves comparing the undiscounted future net
operating cash flows plus a terminal value to the carrying amount of the storage property.
We identified the evaluation of storage properties for impairment as a critical audit matter. The Partnership uses revenue and
expense growth rates, and terminal value capitalization rate assumptions in determining estimated future cash flows as part of its
impairment assessment. Changes to these assumptions could have a significant impact on the determination of recoverability of
the carrying amount of a storage property and involved subjective auditor judgement.
F-6
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested
the operating effectiveness of certain internal controls over the Partnership’s storage property impairment process, including
controls related to the use of the revenue and expense growth rates, and terminal value capitalization rate. We assessed the
Partnership’s forecasted growth rates against the Partnership’s historical growth rates and published reports of industry data. We
evaluated the Partnership’s expected terminal value capitalization rates by comparing them to published reports of industry data
and historical transactions of the Partnership. We also identified the threshold rates at which the revenue and expense growth
rates and terminal value capitalization rate assumptions would indicate the storage property may be impaired and analyzed those
threshold rates against the published industry data and historical results.
/s/ KPMG LLP
We have served as the Partnership’s auditor since 2009.
Philadelphia, Pennsylvania
February 26, 2021
F-7
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees
CubeSmart:
Opinion on Internal Control Over Financial Reporting
We have audited CubeSmart and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2020, based on
criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) 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) (PCAOB), the
consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations,
comprehensive income (loss), equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the
related notes and financial statement schedule III (collectively, the consolidated financial statements), and our report dated February 26,
2021 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’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 the accompanying 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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial reporting 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.
Definition and Limitations of Internal Control Over Financial Reporting
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.
/s/ KPMG LLP
Philadelphia, Pennsylvania
February 26, 2021
F-8
Report of Independent Registered Public Accounting Firm
To the Partners of CubeSmart, L.P. and the Board of Trustees of CubeSmart:
Opinion on Internal Control Over Financial Reporting
We have audited CubeSmart, L.P. and subsidiaries’ (the Partnership) internal control over financial reporting as of December 31, 2020,
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission. In our opinion, the Partnership maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) 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) (PCAOB), the
consolidated balance sheets of the Partnership as of December 31, 2020 and 2019, the related consolidated statements of operations,
comprehensive income (loss), capital, and cash flows for each of the years in the three-year period ended December 31, 2020, and the
related notes and financial statement schedule III (collectively, the consolidated financial statements), and our report dated February 26,
2021 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Partnership’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 the accompanying Management’s Report on CubeSmart L.P.
Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Partnership’s internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect
to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial reporting 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.
Definition and Limitations of Internal Control Over Financial Reporting
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.
/s/ KPMG LLP
Philadelphia, Pennsylvania
February 26, 2021
F-9
CUBESMART AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
ASSETS
Storage properties
Less: Accumulated depreciation
Storage properties, net (including VIE assets of $119,345 and $92,612, respectively)
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, net
Revolving credit facility
Mortgage loans and notes payable, net
Lease liabilities - finance leases
Accounts payable, accrued expenses and other liabilities
Distributions payable
Deferred revenue
Security deposits
Total liabilities
Noncontrolling interests in the Operating Partnership
Commitments and contingencies
Equity
Common shares $.01 par value, 400,000,000 shares authorized, 197,405,989 and 193,557,024 shares
issued and outstanding at December 31, 2020 and 2019, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total CubeSmart shareholders’ equity
Noncontrolling interests in subsidiaries
Total equity
Total liabilities and equity
See accompanying notes to the consolidated financial statements.
December 31,
2020
2019
$ 5,489,754 $ 4,699,844
(925,359)
3,774,485
54,857
3,584
4,059
91,117
101,443
$ 4,778,142 $ 4,029,545
(983,940)
4,505,814
3,592
2,637
3,275
92,071
170,753
$ 2,030,372 $ 1,835,725
—
96,040
—
137,880
64,688
25,313
475
2,160,121
117,800
216,504
65,599
159,140
68,301
29,087
1,077
2,687,880
249,414
62,088
1,974
2,805,673
(632)
(974,799)
1,832,216
8,632
1,840,848
1,936
2,674,745
(729)
(876,606)
1,799,346
7,990
1,807,336
$ 4,778,142 $ 4,029,545
F-10
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
OTHER (EXPENSE) INCOME
Interest:
Interest expense on loans
Loan procurement amortization expense
Loss on early extinguishment of debt
Equity in earnings (losses) of real estate ventures
Gains from sale of real estate, net
Other
Total other expense
NET INCOME
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING
INTERESTS
Noncontrolling interests in the Operating Partnership
Noncontrolling interest in subsidiaries
NET INCOME ATTRIBUTABLE TO THE COMPANY’S COMMON
For the year ended December 31,
2019
2018
2020
$
581,009 $
552,404 $
70,723
27,445
679,177
223,634
156,573
41,423
421,630
(75,890)
(2,674)
(18,020)
178
6,710
(240)
(89,936)
167,611
67,558
23,953
643,915
209,739
163,547
38,560
411,846
(72,525)
(2,819)
—
11,122
1,508
1,416
(61,298)
170,771
517,535
60,156
20,253
597,944
196,866
143,350
37,712
377,928
(62,132)
(2,313)
—
(865)
10,576
206
(54,528)
165,488
(1,825)
(165)
(1,708)
54
(1,820)
221
SHAREHOLDERS
$
165,621 $
169,117 $
163,889
Basic earnings per share attributable to common shareholders
Diluted earnings per share attributable to common shareholders
$
$
0.85 $
0.85 $
0.89 $
0.88 $
0.89
0.88
Weighted average basic shares outstanding
Weighted average diluted shares outstanding
194,147
194,943
190,874
191,576
184,653
185,495
See accompanying notes to the consolidated financial statements.
F-11
CUBESMART AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
NET INCOME
Other comprehensive income (loss):
Unrealized gains (losses) on interest rate swaps
Reclassification of realized losses (gains) on interest rate swaps
OTHER COMPREHENSIVE INCOME (LOSS):
COMPREHENSIVE INCOME
Comprehensive income attributable to noncontrolling interests in the
Operating Partnership
Comprehensive (income) loss attributable to noncontrolling interest in
subsidiaries
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE COMPANY
$
For the year ended December 31,
2019
2018
2020
$
167,611 $
170,771 $
165,488
—
81
81
167,692
232
70
302
171,073
(979)
(60)
(1,039)
164,449
(1,809)
(1,710)
(1,814)
(165)
165,718 $
54
169,417 $
221
162,856
See accompanying notes to the consolidated financial statements.
F-12
CUBESMART AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands)
Common
Shares
Additional Accumulated Other
Paid-in
Number Amount Capital
182,216 $ 1,822 $ 2,356,620 $
Comprehensive
Income (Loss)
Accumulated Shareholders’
Deficit
Equity
1,629,134 $
3 $
(729,311) $
Total
Noncontrolling
Interests in
Total
Subsidiaries Equity
Noncontrolling
Interests
in the
Operating
Partnership
54,320
6,236 $ 1,635,370 $
925
(169)
925
(169)
131,829
1
4,404
3,835
2,570
1,541
(221)
(299)
163,668
(627)
(226,599)
6,771 $ 1,716,449 $
7,376
(188)
(5,915)
7,376
(188)
(40,605)
196,304
2,486
3,686
4,487
1,786
(5,918)
169,063
300
(247,890)
(54)
7,990 $ 1,807,336 $
682
(205)
682
(205)
120,727
2,824
961
4,502
1,952
(4,230)
165,786
97
(259,584)
165
8,632 $ 1,840,848 $
6,242
(4,404)
299
1,820
(6)
(2,452)
55,819
3,576
(2,486)
5,918
1,708
2
(2,449)
62,088
186,933
(2,824)
4,230
1,825
(16)
(2,822)
249,414
Balance at December 31, 2017
Contributions from noncontrolling interest in subsidiaries
Distributions paid to noncontrolling interest in subsidiaries
Issuance of common shares, net
Issuance of restricted shares
Issuance of OP units
Conversion from units to shares
Exercise of stock options
Amortization of restricted shares
Share compensation expense
Adjustment for noncontrolling interests in the Operating
Partnership
Net income (loss)
Other comprehensive (loss) income, net
Common share distributions ($1.22 per share)
Balance at December 31, 2018
Contributions from noncontrolling interest in subsidiaries
Distributions paid to noncontrolling interest in subsidiaries
Acquisition of noncontrolling interest in subsidiary
Issuance of common shares, net
Issuance of restricted shares
Issuance of OP units
Conversion from units to shares
Exercise of stock options
Amortization of restricted shares
Share compensation expense
Adjustment for noncontrolling interests in the Operating
Partnership
Net income (loss)
Other comprehensive income, net
Common share distributions ($1.29 per share)
Balance at December 31, 2019
Contributions from noncontrolling interest in subsidiaries
Distributions paid to noncontrolling interest in subsidiaries
Issuance of common shares, net
Issuance of restricted shares
Issuance of OP units
Conversion from units to shares
Exercise of stock options
Amortization of restricted shares
Share compensation expense
Adjustment for noncontrolling interests in the Operating
4,291
86
147
405
43
1
1
4
131,786
4,403
3,831
2,570
1,541
187,145 $ 1,871 $ 2,500,751 $
5,899
52
80
381
(34,690)
196,244
60
1
4
2,485
3,682
4,487
1,786
193,557 $ 1,936 $ 2,674,745 $
131,829
1
4,404
3,835
2,570
1,541
(1,032)
(299)
163,889
405
(226,599)
(1,029) $
(791,915) $
(299)
163,889
(627)
(226,599)
1,709,678 $
(34,690)
196,304
2,486
3,686
4,487
1,786
(5,918)
169,117
300
(729) $
(247,890)
(876,606) $
(5,918)
169,117
300
(247,890)
1,799,346 $
3,627
60
100
62
37
120,690
1
2,823
961
4,502
1,952
120,727
2,824
961
4,502
1,952
Partnership
Net income
Other comprehensive income (loss), net
Common share distributions ($1.33 per share)
Balance at December 31, 2020
197,406 $ 1,974 $ 2,805,673 $
(632) $
(4,230)
165,621
97
(4,230)
165,621
97
(259,584)
(259,584)
(974,799) $ 1,832,216 $
See accompanying notes to the consolidated financial statements.
F-13
CUBESMART AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the year ended December 31,
2019
2018
2020
$
167,611 $
170,771 $
165,488
Operating Activities
Net income
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization
Loss on early extinguishment of debt
Equity in (earnings) losses of real estate ventures
Gains from sale of real estate, net
Equity compensation expense
Accretion of fair market value adjustment of debt
Changes in other operating accounts:
Other assets
Accounts payable and accrued expenses
Other liabilities
Net cash provided by operating activities
Investing Activities
$
Acquisitions of storage properties
Additions and improvements to storage properties
Development costs
Cash paid for partner's interest in real estate venture, net of cash, cash equivalents and restricted cash acquired
Investment in real estate ventures
Cash distributed from real estate ventures
Proceeds from sale of real estate, net
Net cash used in investing activities
$
Financing Activities
Proceeds from:
Unsecured senior notes
Revolving credit facility
Principal payments on:
Unsecured senior notes
Revolving credit facility
Unsecured term loans
Mortgage loans and notes payable
Loan procurement costs
Debt prepayment costs
Settlement of hedge transactions
Acquisition of noncontrolling interest in subsidiary, net
Proceeds from issuance of common shares, net
Cash paid upon vesting of restricted shares
Exercise of stock options
Contributions from noncontrolling interests in subsidiaries
Distributions paid to noncontrolling interests in subsidiaries
Distributions paid to common shareholders
Distributions paid to noncontrolling interests in Operating Partnership
Net cash provided by financing activities
Change in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year
Supplemental Cash Flow and Noncash Information
Cash paid for interest, net of interest capitalized
Supplemental disclosure of noncash activities:
Acquisitions of storage properties
Proceeds held in escrow from real estate venture's sale of real estate (see note 4)
Noncash consideration for acquisition of partner's interest in real estate venture (see note 4)
Right-of-use assets obtained in exchange for lease liabilities
Discount on issuance of unsecured senior notes
Noncash drawdown on revolving credit facility
Mortgage loan assumptions
Repayment of unsecured term loan through noncash drawdown on revolving credit facility
Accretion of put liability
Derivative valuation adjustment
Loan procurement costs
Issuance of OP units (see note 4)
Acquisition of noncontrolling interest in subsidiary
Contributions from noncontrolling interests in subsidiaries
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
159,247
18,020
(178)
(6,710)
7,140
(259)
(9,674)
13,922
1,914
351,033 $
(417,988)
(49,857)
(55,286)
—
(7,022)
6,246
12,466
(511,441) $
166,366
—
(11,122)
(1,508)
6,694
(718)
(6,578)
6,042
1,821
331,768 $
(117,998)
(37,569)
(102,826)
(117,959)
(10,264)
7,096
3,856
(375,664) $
445,833
429,085
696,426
859,313
(250,000)
(311,285)
—
(46,093)
(3,764)
(17,584)
—
—
120,727
(686)
961
—
(205)
(256,253)
(2,540)
108,196 $
(52,212)
58,441
6,229 $
—
(1,158,776)
(200,000)
(11,652)
(6,023)
—
(807)
(35,777)
196,304
(421)
3,686
48
(188)
(243,859)
(2,419)
95,855 $
51,959
6,482
58,441 $
145,663
—
865
(10,576)
5,572
(735)
(4,937)
2,653
342
304,335
(214,510)
(27,626)
(86,002)
—
(19,216)
8,706
16,389
(322,259)
—
679,535
—
(565,710)
—
(9,816)
—
—
—
—
131,830
(1,461)
3,835
925
(169)
(221,328)
(2,393)
15,248
(2,676)
9,158
6,482
80,792 $
69,283 $
66,829
(2,623) $
— $
— $
61,423 $
4,167 $
— $
169,056 $
— $
7,917 $
81 $
— $
186,933 $
— $
682 $
— $
8,288 $
(8,288) $
— $
3,574 $
103,938 $
— $
(100,000) $
5,895 $
302 $
(3,770) $
3,576 $
(4,828) $
7,328 $
—
—
—
—
—
—
7,166
—
24,747
(633)
—
6,242
—
—
See accompanying notes to the consolidated financial statements.
F-14
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
Storage properties
Less: Accumulated depreciation
Storage properties, net (including VIE assets of $119,345 and $92,612, respectively)
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, net
Revolving credit facility
Mortgage loans and notes payable, net
Lease liabilities - finance leases
Accounts payable, accrued expenses and other liabilities
Distributions payable
Deferred revenue
Security deposits
Total liabilities
Limited Partnership interests of third parties
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
$
$
$
December 31,
2020
2019
5,489,754 $
(983,940)
4,505,814
3,592
2,637
3,275
92,071
170,753
4,778,142 $
4,699,844
(925,359)
3,774,485
54,857
3,584
4,059
91,117
101,443
4,029,545
2,030,372 $
117,800
216,504
65,599
159,140
68,301
29,087
1,077
2,687,880
1,835,725
—
96,040
—
137,880
64,688
25,313
475
2,160,121
249,414
62,088
1,832,848
(632)
1,832,216
8,632
1,840,848
4,778,142 $
1,800,075
(729)
1,799,346
7,990
1,807,336
4,029,545
$
See accompanying notes to the consolidated financial statements.
F-15
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per common unit data)
For the year ended December 31,
2019
2018
2020
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
OTHER (EXPENSE) INCOME
Interest:
Interest expense on loans
Loan procurement amortization expense
Loss on early extinguishment of debt
Equity in earnings (losses) of real estate ventures
Gains from sale of real estate, net
Other
Total other expense
$
581,009 $
552,404 $
70,723
27,445
679,177
223,634
156,573
41,423
421,630
(75,890)
(2,674)
(18,020)
178
6,710
(240)
(89,936)
167,611
67,558
23,953
643,915
209,739
163,547
38,560
411,846
(72,525)
(2,819)
—
11,122
1,508
1,416
(61,298)
170,771
517,535
60,156
20,253
597,944
196,866
143,350
37,712
377,928
(62,132)
(2,313)
—
(865)
10,576
206
(54,528)
165,488
NET INCOME
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING
INTERESTS
Noncontrolling interest in subsidiaries
NET INCOME ATTRIBUTABLE TO CUBESMART L.P.
Operating Partnership interests of third parties
NET INCOME ATTRIBUTABLE TO COMMON UNITHOLDERS
$
(165)
167,446
(1,825)
165,621 $
54
170,825
(1,708)
169,117 $
221
165,709
(1,820)
163,889
Basic earnings per unit attributable to common unitholders
Diluted earnings per unit attributable to common unitholders
$
$
0.85 $
0.85 $
0.89 $
0.88 $
0.89
0.88
Weighted average basic units outstanding
Weighted average diluted units outstanding
194,147
194,943
190,874
191,576
184,653
185,495
See accompanying notes to the consolidated financial statements.
F-16
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
NET INCOME
Other comprehensive income (loss):
Unrealized gains (losses) on interest rate swaps
Reclassification of realized losses (gains) on interest rate swaps
OTHER COMPREHENSIVE INCOME (LOSS):
COMPREHENSIVE INCOME
Comprehensive income attributable to Operating Partnership interests of
third parties
Comprehensive (income) loss attributable to noncontrolling interest in
subsidiaries
COMPREHENSIVE INCOME ATTRIBUTABLE TO OPERATING
For the year ended December 31,
2019
2018
2020
$
167,611 $
170,771 $
165,488
—
81
81
167,692
232
70
302
171,073
(979)
(60)
(1,039)
164,449
(1,809)
(1,710)
(1,814)
(165)
54
221
PARTNER
$
165,718 $
169,417 $
162,856
See accompanying notes to the consolidated financial statements.
F-17
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITAL
(in thousands)
Number of
Common
OP
Units
Outstanding
Accumulated Other
Operating Comprehensive
Income (Loss)
Partner
Total
CubeSmart L.P.
Capital
Noncontrolling
Interest in
Subsidiaries
Operating
Partnership
Interests
of Third Parties
Total
Capital
6,236 $ 1,635,370 $
925
(169)
(221)
925
(169)
131,829
1
4,404
3,835
2,570
1,541
(299)
163,668
(627)
(226,599)
6,771 $ 1,716,449 $
7,376
(188)
(5,915)
7,376
(188)
(40,605)
196,304
2,486
3,686
4,487
1,786
(5,918)
169,063
300
(247,890)
(54)
7,990 $ 1,807,336 $
682
(205)
682
(205)
120,727
2,824
961
4,502
1,952
(4,230)
165,786
97
(259,584)
165
8,632 $ 1,840,848 $
54,320
6,242
(4,404)
299
1,820
(6)
(2,452)
55,819
3,576
(2,486)
5,918
1,708
2
(2,449)
62,088
186,933
(2,824)
4,230
1,825
(16)
(2,822)
249,414
Balance at December 31, 2017
Contributions from noncontrolling interest in subsidiaries
Distributions paid to noncontrolling interest in subsidiaries
Issuance of common OP units, net
Issuance of restricted OP units
Issuance of OP units
Conversion from OP units to shares
Exercise of OP unit options
Amortization of restricted OP units
OP unit compensation expense
Adjustment for Operating Partnership interests of third parties
Net income (loss)
Other comprehensive income (loss), net
Common OP unit distributions ($1.22 per unit)
Balance at December 31, 2018
Contributions from noncontrolling interest in subsidiaries
Distributions paid to noncontrolling interest in subsidiaries
Acquisition of noncontrolling interest in subsidiary
Issuance of common OP units, net
Issuance of restricted OP units
Issuance of OP units
Conversion from OP units to shares
Exercise of OP unit options
Amortization of restricted OP units
OP unit compensation expense
Adjustment for Operating Partnership interests of third parties
Net income (loss)
Other comprehensive income, net
Common OP unit distributions ($1.29 per unit)
Balance at December 31, 2019
Contributions from noncontrolling interest in subsidiaries
Distributions paid to noncontrolling interest in subsidiaries
Issuance of common OP units, net
Issuance of restricted OP units
Issuance of OP units
Conversion from OP units to shares
Exercise of OP unit options
Amortization of restricted OP units
OP unit compensation expense
Adjustment for Operating Partnership interests of third parties
Net income
Other comprehensive income (loss), net
Common OP unit distributions ($1.33 per unit)
Balance at December 31, 2020
182,216 $ 1,629,131 $
3 $
1,629,134 $
4,291
86
131,829
1
147
405
4,404
3,835
2,570
1,541
(299)
163,889
405
(226,599)
(1,032)
187,145 $ 1,710,707 $
(1,029) $
5,899
52
80
381
(34,690)
196,304
2,486
3,686
4,487
1,786
(5,918)
169,117
(247,890)
300
193,557 $ 1,800,075 $
(729) $
3,627
60
100
62
120,727
2,824
961
4,502
1,952
(4,230)
165,621
(259,584)
97
197,406 $ 1,832,848 $
(632) $
131,829
1
4,404
3,835
2,570
1,541
(299)
163,889
(627)
(226,599)
1,709,678 $
(34,690)
196,304
2,486
3,686
4,487
1,786
(5,918)
169,117
300
(247,890)
1,799,346 $
120,727
2,824
961
4,502
1,952
(4,230)
165,621
97
(259,584)
1,832,216 $
See accompanying notes to the consolidated financial statements.
F-18
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the year ended December 31,
2019
2018
2020
$
167,611 $
170,771 $
165,488
Operating Activities
Net income
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization
Loss on early extinguishment of debt
Equity in (earnings) losses of real estate ventures
Gains from sale of real estate, net
Equity compensation expense
Accretion of fair market value adjustment of debt
Changes in other operating accounts:
Other assets
Accounts payable and accrued expenses
Other liabilities
Net cash provided by operating activities
Investing Activities
$
Acquisitions of storage properties
Additions and improvements to storage properties
Development costs
Cash paid for partner's interest in real estate venture, net of cash, cash equivalents and restricted cash acquired
Investment in real estate ventures
Cash distributed from real estate ventures
Proceeds from sale of real estate, net
Net cash used in investing activities
$
Financing Activities
Proceeds from:
Unsecured senior notes
Revolving credit facility
Principal payments on:
Unsecured senior notes
Revolving credit facility
Unsecured term loans
Mortgage loans and notes payable
Loan procurement costs
Debt prepayment costs
Settlement of hedge transactions
Acquisition of noncontrolling interest in subsidiary, net
Proceeds from issuance of common OP units
Cash paid upon vesting of restricted OP units
Exercise of OP unit options
Contributions from noncontrolling interests in subsidiaries
Distributions paid to noncontrolling interests in subsidiaries
Distributions paid to common OP unitholders
Net cash provided by financing activities
Change in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year
Supplemental Cash Flow and Noncash Information
Cash paid for interest, net of interest capitalized
Supplemental disclosure of noncash activities:
Acquisitions of storage properties
Proceeds held in escrow from real estate venture's sale of real estate (see note 4)
Noncash consideration for acquisition of partner's interest in real estate venture (see note 4)
Right-of-use assets obtained in exchange for lease liabilities
Discount on issuance of unsecured senior notes
Noncash drawdown on revolving credit facility
Mortgage loan assumptions
Repayment of unsecured term loan through noncash drawdown on revolving credit facility
Accretion of put liability
Derivative valuation adjustment
Loan procurement costs
Issuance of OP units (see note 4)
Acquisition of noncontrolling interest in subsidiary
Contributions from noncontrolling interests in subsidiaries
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
159,247
18,020
(178)
(6,710)
7,140
(259)
(9,674)
13,922
1,914
351,033 $
(417,988)
(49,857)
(55,286)
—
(7,022)
6,246
12,466
(511,441) $
445,833
429,085
(250,000)
(311,285)
—
(46,093)
(3,764)
(17,584)
—
—
120,727
(686)
961
—
(205)
(258,793)
108,196 $
(52,212)
58,441
6,229 $
166,366
—
(11,122)
(1,508)
6,694
(718)
(6,578)
6,042
1,821
331,768 $
(117,998)
(37,569)
(102,826)
(117,959)
(10,264)
7,096
3,856
(375,664) $
696,426
859,313
—
(1,158,776)
(200,000)
(11,652)
(6,023)
—
(807)
(35,777)
196,304
(421)
3,686
48
(188)
(246,278)
95,855 $
51,959
6,482
58,441 $
145,663
—
865
(10,576)
5,572
(735)
(4,937)
2,653
342
304,335
(214,510)
(27,626)
(86,002)
—
(19,216)
8,706
16,389
(322,259)
—
679,535
—
(565,710)
—
(9,816)
—
—
—
—
131,830
(1,461)
3,835
925
(169)
(223,721)
15,248
(2,676)
9,158
6,482
80,792 $
69,283 $
66,829
(2,623) $
— $
— $
61,423 $
4,167 $
— $
169,056 $
— $
7,917 $
81 $
— $
186,933 $
— $
682 $
— $
8,288 $
(8,288) $
— $
3,574 $
103,938 $
— $
(100,000) $
5,895 $
302 $
(3,770) $
3,576 $
(4,828) $
7,328 $
—
—
—
—
—
—
7,166
—
24,747
(633)
—
6,242
—
—
See accompanying notes to the consolidated financial statements.
F-19
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. 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. As of December 31, 2020, the Company owned
self-storage properties located in the District of Columbia and 24 states throughout the United States which are presented under one
reportable segment: the Company owns, operates, develops, manages and acquires self-storage properties.
As of December 31, 2020, the Parent Company owned approximately 96.4% 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 the Operating Partnership 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 following a specified restricted period 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. To the extent that the Company (i) has the power to direct the activities of the VIE that most
significantly impact the economic performance of the VIE and (ii) has the obligation or rights to absorb the VIE's losses or receive its
benefits, then the Company is considered the primary beneficiary. 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.
The Operating Partnership meets the criteria as a VIE. The Parent Company’s sole significant asset is its investment in the Operating
Partnership. As a result, substantially all of the Parent Company’s assets and liabilities represent those assets and liabilities of the
Operating Partnership. All of the Parent Company’s debt is an obligation of the Operating Partnership.
Noncontrolling Interests
The Financial Accounting Standards Board (“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 controlled or consolidated entities that are less than wholly owned are reported at the consolidated
F-20
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.
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 OP units and were a component of the consideration the Company paid to acquire
certain self-storage properties. Limited partners who acquired OP units have the right to require the Operating Partnership to redeem part
or all of their OP 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 interests, the Operating Partnership reflected these interests at their redemption value as of December 31, 2020,
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 $4.2 million as of December 31, 2020. Disclosure of such redemption provisions is
provided in note 12.
Estimates
The preparation of consolidated 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 management believes the assumptions and estimates made are
reasonable and appropriate, as discussed in the applicable sections throughout these consolidated financial statements, different
assumptions and estimates could materially impact the Company’s 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 the Company’s future
operating results.
Self-Storage Properties
Self-storage properties are carried at historical cost less accumulated depreciation and impairment losses. The cost of self-storage
properties reflects their purchase price or development cost. Acquisition costs are accounted for in accordance with Accounting Standard
Update (“ASU”) No. 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business, which was adopted on
January 1, 2018, and are generally capitalized. Costs incurred for the renovation of a store are capitalized to the Company’s investment in
that store. 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. The costs to develop self-storage properties are
capitalized to construction in progress while the projects are under development.
Purchase Price Allocation
When stores are acquired, the purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on
estimated fair values. Allocations to land, building and improvements and equipment are recorded based upon their respective fair values
as estimated by management. If appropriate, the Company allocates 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
F-21
leases. Substantially all of the storage leases in place at acquired stores 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
associated with storage leases assumed at acquisition. Above- or below- market lease intangibles associated with assumed ground leases in
which the Company serves as lessee are recorded as an adjustment to the right-of-use asset and reflect the difference between the
contractual amounts to be paid pursuant to each in-place ground lease and management’s estimate of fair market lease rates. These
amounts are amortized over the term of the lease. To date, no intangible asset has been recorded for the value of customer relationships,
because the Company does not have any concentrations of significant customers and the average customer turnover is fairly frequent.
Depreciation and Amortization
The costs of self-storage properties and improvements are depreciated using the straight-line method based on useful lives ranging from
five to 39 years. Right-of-use assets associated with finance leases are amortized from the lease commencement date to the earlier of the
useful life of the right-to-use asset or the end of the lease term. Fully depreciated or amortized assets and the associated accumulated
depreciation or amortization are written off. The Company wrote off fully depreciated or amortized real estate assets and in-place lease
intangible assets of $83.4 million and $20.5 million, respectively, for the year ended December 31, 2020, and $81.7 million and $11.3
million, respectively, for the year ended December 31, 2019.
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 an 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 store’s basis is recoverable. If a store’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. There were no impairment
losses recognized during the years ended December 31, 2020, 2019 and 2018.
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 store (or group of stores), (b) the store is available for immediate sale in its present condition subject only to terms that are usual and
customary for sales of such stores, (c) an active program to locate a buyer and other actions required to complete the plan to sell the store
have been initiated, (d) the sale of the store is probable and transfer of the asset is expected to be completed within one year, (e) the store 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. Stores classified
as held for sale are reported at the lesser of carrying value or fair value less estimated costs to sell and are not depreciated. There were no
stores classified as held for sale as of December 31, 2020.
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 generally consists of cash deposits required for debt service, capital replacement and expense reserves in connection
with the terms of our loan agreements.
Loan Procurement Costs
Loan procurement costs related to borrowings were $38.1 million and $31.5 million as of December 31, 2020 and 2019, respectively,
and are reported net of accumulated amortization of $13.1 million and $12.9 million as of December 31, 2020 and 2019, respectively. In
accordance with ASU No. 2015-03, Loan procurement costs, net are presented as a direct deduction from the carrying amount of the
F-22
related debt liability. If there is not an associated debt liability recorded on the consolidated balance sheets, the costs are recorded as an
asset net of accumulated amortization. Loan procurement costs associated with the Company’s revolving credit facility remain in Loan
procurement costs, net of amortization on the Company’s consolidated balance sheets. The costs are amortized over the estimated life of
the related debt using the effective interest method and are reported as Loan procurement amortization expense on the Company’s
consolidated statements of operations.
Other Assets
Other assets are comprised of the following as of December 31, 2020 and 2019:
Intangible assets, net of accumulated amortization of $2,123 and $10,170
Accounts receivable, net
Prepaid property taxes
Prepaid insurance
Amounts due from affiliates (see note 14)
Assets held in trust related to deferred compensation arrangements
Right-of-use assets - operating leases (see note 13)
Equity investment recorded at cost (1)
Other
Total other assets, net
December 31,
2020
2019
(in thousands)
57,820 $
5,829
6,334
2,626
13,130
17,207
55,302
5,000
7,505
170,753 $
10,283
6,386
4,706
2,191
10,450
13,280
41,698
5,000
7,449
101,443
$
$
(1) On September 5, 2018, the Company invested $5.0 million in exchange for 100% of the Class A preferred units of Capital
Storage Partners, LLC (“Capital Storage”), a newly formed venture that acquired 22 self-storage properties located in Florida (4),
Oklahoma (5) and Texas (13). The Class A preferred units earn an 11% cumulative dividend prior to any other distributions. The
Company’s investment in Capital Storage and the related dividends are included in Other assets, net on the Company’s
consolidated balance sheets and in Other income on the Company’s consolidated statements of operations, respectively.
Environmental Costs
Our practice is to conduct or obtain environmental assessments in connection with the acquisition or development of additional stores.
Whenever the environmental assessment for one of the Company’s stores indicates that a store is impacted by soil or groundwater
contamination from prior owners/operators or other sources, the Company will work with environmental consultants and where
appropriate, state governmental agencies, to ensure that the store 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 the Company’s 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 from sale of real estate in accordance with the guidance on transfer of nonfinancial assets. Payments
received from purchasers prior to closing are recorded as deposits. Profit on real estate sold is recognized when a valid contract exists, the
collectability of the sales price is reasonably assured and the control of the property has transferred.
Advertising and Marketing Costs
The Company incurs advertising and marketing costs primarily attributable to internet marketing and other media advertisements. The
Company incurred $16.9 million, $11.5 million and $10.3 million in advertising and marketing expenses for the years ended December 31,
2020, 2019 and 2018, respectively, which are included in Property operating expenses on the Company’s consolidated statements of
operations.
F-23
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 years ended December 31, 2020, 2019 and 2018, the Company recognized $1.5 million, $2.1 million and $1.6 million,
respectively, of equity offering costs related to the issuance of common shares.
Other Property Related Income
Other property related income consists of late fees, administrative charges, customer storage protection plan fees, 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 asset(s) using the weighted average rate of the Company’s outstanding debt. For the years ended
December 31, 2020, 2019 and 2018, the Company capitalized $2.7 million, $3.0 million and $4.4 million, respectively, of interest incurred
that is directly associated with construction activities.
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. The Company had no outstanding derivatives as of December 31, 2020 or 2019.
Income Taxes
The Company has elected to be taxed as a real estate investment trust under Sections 856-860 of the Internal Revenue Code since the
Company’s commencement of operations in 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 net tax basis in the Company’s assets was approximately $4,384.1 million
and $3,909.1 million as of December 31, 2020 and 2019.
Since the Company’s initial quarter as a publicly-traded REIT, it has made regular quarterly distributions to its 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, 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 return of capital. The characterization of
the Company’s dividends for 2020 consisted of a 74.174% ordinary income distribution, a 2.138% capital gain distribution and a 23.688%
return of capital distribution from earnings and profits.
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 2020, 2019 or 2018.
Taxable REIT subsidiaries are subject to federal and state income taxes. Our taxable REIT subsidiaries had a net deferred tax asset
related to expenses which are deductible for tax purposes in future periods of $0.4 million and $0.7 million as of December 31, 2020 and
2019, respectively.
F-24
Earnings per Share and Unit
Basic earnings per share and unit are 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 were 796,000, 702,000 and 842,000 for the years ended
December 31, 2020, 2019 and 2018, respectively.
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, which is included
in general and administrative expense on the Company’s consolidated statement of operations. The Company recognizes forfeitures on
share-based payments as they occur.
Investments in Unconsolidated Real Estate Ventures
The Company accounts for its investments in unconsolidated real estate ventures under the equity method of accounting when it is
determined that the Company has the ability to exercise significant influence over the venture. Under the equity method, investments in
unconsolidated real estate ventures are recorded initially at cost, as investments in real estate ventures, and subsequently adjusted for
equity in earnings (losses), cash contributions, less distributions and impairments. On a periodic basis, management 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 that is other than temporary 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 the
Company’s 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. There were no impairment losses related to the Company’s investments
in unconsolidated real estate ventures recognized during the years ended December 31, 2020 and 2019.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06 – Debt – Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging – Contracts in an Entity’s Own Equity (Subtopic 815-40). The new guidance eliminates the beneficial conversion
and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own
equity that are currently accounted for as derivatives because of certain settlement provisions. In addition, the new guidance modifies how
particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted earnings per share
computation. The standard is effective on January 1, 2022, with early adoption permitted, but only as of the beginning of an entity’s annual
fiscal year. The Company is currently assessing the impact of the adoption of the new standard on its consolidated financial statements and
related disclosures.
In June 2016, the FASB issued ASU No. 2016-13 – Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments. The new guidance changes how entities measure credit losses for most financial assets. This standard requires an
entity to estimate its lifetime expected credit loss and record an allowance that, when deducted from the amortized cost basis of the
financial asset, presents the net amount expected to be collected on the financial asset. In November 2018, the FASB issued ASU No.
2018-19 – Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarifies that receivables arising from
operating leases are within the scope of the leasing standard (ASU No. 2016-02), and not within the scope of ASU No. 2016-13. The
standard became effective on January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s
consolidated financial statements.
In August 2017, the FASB issued ASU No. 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting
for Hedging Activities. The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with
the economic objectives of those activities. The standard became effective on January 1, 2020 and did not have a material impact on the
Company’s consolidated financial statements.
F-25
In February 2016, the FASB issued ASU No. 2016-02 - Leases (Topic 842), which sets out the principles for the recognition,
measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires
lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is
effectively a financed purchase by the lessee. This classification determines whether lease expense is recognized based on an effective
interest method or on a straight line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease
liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less are
accounted for similar to previous guidance for operating leases. The new standard requires lessors to account for leases using an approach
that is substantially equivalent to previous guidance for sales-type leases, direct financing leases and operating leases. The Company
adopted the standard on January 1, 2019, the date it became effective for public companies, using the modified retrospective approach
whereby the cumulative effect of adoption was recognized on the adoption date and prior periods were not restated. There was no net
cumulative effect adjustment to retained earnings as of January 1, 2019 as a result of this adoption. Upon adoption, the Company elected
the package of practical expedients permitted within the standard, which among other things, allows for the carryforward of historical
lease classification. The Company also elected the practical expedient provided to lessors in a subsequent amendment to the standard that
removed the requirement to separate lease and nonlease components, provided certain conditions were met. Refer to note 13 for the impact
of the adoption of ASU No. 2016-02 – Leases (Topic 842) on the Company’s consolidated financial statements.
Concentration of Credit Risk
The Company’s stores are located in major metropolitan and rural areas and have numerous customers per store. No single customer
represents a significant concentration of our revenues. The stores in New York, Florida, Texas and California provided approximately
16%, 15%, 9% and 8%, respectively, of the Company’s total revenues for the year ended December 31, 2020. The stores in Florida, New
York, Texas and California provided approximately 16%, 16%, 10% and 8%, respectively, of the Company’s total revenues for the year
ended December 31, 2019. The stores in Florida, New York, Texas and California provided approximately 17%, 16%, 10% and 8%,
respectively, of the Company’s total revenues for the year ended December 31, 2018.
3. STORAGE PROPERTIES
The book value of the Company’s real estate assets is summarized as follows:
Land
Buildings and improvements
Equipment
Construction in progress
Right-of-use assets - finance leases
Storage properties
Less: Accumulated depreciation
Storage properties, net
2020
December 31,
(in thousands)
2019
1,093,503 $
4,122,995
123,044
108,316
41,896
5,489,754
(983,940)
4,505,814
$
858,541
3,619,594
128,111
93,598
—
4,699,844
(925,359)
3,774,485
$
$
F-26
The following table summarizes the Company’s acquisition and disposition activity for the years ended December 31, 2020, 2019 and
2018:
Asset/Portfolio
2020 Acquisitions:
Texas Asset
Maryland Asset
New Jersey Asset
Florida Asset
Texas Asset
Texas Asset
Nevada Asset
New York Asset
Storage Deluxe Assets
Florida Assets
Florida Asset
Virginia Asset
2020 Disposition:
New York Asset
2019 Acquisitions:
Maryland Asset
Florida Assets
Arizona Asset
HVP III Assets
Georgia Asset
South Carolina Asset
Texas Asset
Florida Assets
California Asset
2019 Disposition:
Texas Asset
2018 Acquisitions:
Texas Asset
Texas Asset
Metro DC Asset
Nevada Asset
North Carolina Asset
California Asset
Texas Asset
California Asset
New York Asset
Illinois Asset
2018 Dispositions:
Arizona Assets
Metropolitan Statistical Area
Transaction Date
Stores
(in thousands)
Number of Purchase / Sale Price
San Antonio, TX
Baltimore-Towson, MD
New York-Northern New Jersey-Long Island, NY-NJ-PA
Palm Bay-Melbourne-Titusville, FL
Austin-Round Rock, TX
Dallas-Fort Worth-Arlington, TX
Las Vegas-Paradise, NV
New York-Northern New Jersey-Long Island, NY-NJ-PA
New York-Northern New Jersey-Long Island, NY-NJ-PA
February 2020
April 2020
April 2020
November 2020
November 2020
November 2020
December 2020
December 2020
December 2020
Orlando-Kissimmee, FL / Deltona-Daytona Beach-Ormond Beach, FL December 2020
December 2020
December 2020
Tampa-St. Petersburg-Clearwater, FL
Washington-Arlington-Alexandria, DC-VA-MD-WV
New York-Northern New Jersey-Long Island, NY-NJ-PA
December 2020
Baltimore-Towson, MD
Cape Coral-Fort Myers, FL
Phoenix-Mesa-Scottsdale, AZ
Various (see note 4)
Atlanta-Sandy Springs-Marietta, GA
Charleston-North Charleston, SC
Dallas-Fort Worth-Arlington, TX
Orlando-Kissimmee, FL
Los Angeles-Long Beach-Santa Ana, CA
March 2019
April 2019
May 2019
June 2019
August 2019
August 2019
October 2019
November 2019
December 2019
1
1
1
1
1
1
1
1
8
3
1
1
21
1
1
1
2
1
18
1
1
1
3
1
29
$
$
$
$
$
$
9,025
17,200
48,450
3,900
10,750
10,150
16,800
6,750
540,000
45,500
10,000
17,350
735,875
12,750
12,750
22,000
19,000
1,550
128,250 (1)
14,600
3,300
7,300
32,100
18,500
246,600
College Station-Bryan, TX
October 2019
1
1
$
$
4,146
4,146
Austin-Round Rock, TX
Houston-Sugar Land-Baytown, TX
Washington-Arlington-Alexandria, DC-VA-MD-WV
Las Vegas-Paradise, NV
Charlotte-Gastonia-Concord, NC-SC
Los Angeles-Long Beach-Santa Ana, CA
Houston-Sugar Land-Baytown, TX
San Diego-Carlsbad-San Marcos, CA
New York-Northern New Jersey-Long Island, NY-NJ-PA
Chicago-Naperville-Joliet, IL-IN-WI
January 2018
May 2018
July 2018
September 2018
September 2018
October 2018
October 2018
November 2018
November 2018
December 2018
1
1
1
1
1
1
1
1
1
1
10
$
$
12,200
19,000
34,200
14,350
11,000
53,250
23,150
19,118
37,000
4,250
227,518
Phoenix-Mesa-Scottsdale, AZ
November 2018
2
2
$
$
17,502
17,502
(1) Amount represents the purchase price for 90% of the ownership interest in 191 III CUBE LLC (“HVP III”), which at the time of
the acquisition, owned 18 storage properties (see note 4).
F-27
4. INVESTMENT ACTIVITY
2020 Acquisitions
The Company acquired a portfolio of eight stores located in the outer boroughs of New York City (the “Storage Deluxe Assets”), in two
separate tranches during December 2020, for an aggregate purchase price of $540.0 million. In connection with the acquisition of the
Storage Deluxe Assets, the Company assumed six mortgage loans with an aggregate outstanding principal amount of $154.4 million at the
time of acquisition, one of which had an outstanding principal balance of $33.2 million and was repaid immediately. The assumed
mortgage debt was recorded at a fair value of $169.2 million, which includes an aggregate net premium of $14.8 million to reflect the
estimated fair value of the debt at the time of assumption. The remainder of the purchase price was funded with $210.5 million of cash and
$175.1 million through the issuance of 5,272,023 OP Units (see note 12). In connection with the acquisition of the Storage Deluxe Assets,
which was accounted for as an asset acquisition, the Company allocated the purchase price and acquisition related costs to the tangible and
intangible assets acquired based on fair value. Intangible assets consisted of in-place leases, which aggregated to $48.6 million at the time
of the acquisition and prior to amortization of such amounts. The estimated life of these in-place leases was 12 months. Additionally, as
part of the transaction, the Company assumed three existing ground leases as lessee, two of which have been classified as finance leases
and one of which has been classified as an operating lease (see note 13).
During the year ended December 31, 2020, the Company acquired 13 additional stores located in Florida (5), Maryland (1), Nevada (1),
New Jersey (1), New York (1), Texas (3) and Virginia (1) for an aggregate purchase price of approximately $195.9 million. In connection
with these transactions, which were accounted for as asset acquisitions, the Company allocated the purchase price and acquisition related
costs to the tangible and intangible assets acquired based on fair value. Intangible assets consisted of in-place leases, which aggregated
to $11.4 million at the time of the acquisitions and prior to amortization of such amounts. The estimated life of these in-place leases
was 12 months and the amortization expense that was recognized during 2020 was approximately $2.1 million.
Additionally, on July 20, 2020, the Company acquired land underlying a wholly-owned store located in the Bronx, New York for
$9.5 million. The land was previously subject to a ground lease in which the Company served as lessee. As a result of the transaction,
which was accounted for as an asset acquisition, the Company was released from its obligations under the ground lease, and the right-of-
use asset and lease liability totaling $5.1 million and $5.0 million, respectively, were removed from the Company’s consolidated balance
sheets.
2020 Disposition
On December 22, 2020, the Company sold a self-storage property located in New York for a sales price of $12.8 million. The Company
recorded a $6.7 million gain in connection with the sale.
Development Activity
As of December 31, 2020, the Company had invested in joint ventures to develop six self-storage properties located in Massachusetts
(1), New York (2), Pennsylvania (1) and Virginia (2). Construction for all projects is expected to be completed by the second quarter of
2022 (see note 12). As of December 31, 2020, development costs incurred to date for these projects totaled $94.0 million. Total
construction costs for these projects are expected to be $150.1 million. These costs are capitalized to construction in progress while the
projects are under development and are reflected in Storage properties on the Company’s consolidated balance sheets.
The Company has completed the construction and opened for operation the following stores since January 1, 2018. The costs associated
with the construction of these stores are capitalized to land, building and improvements, as well as equipment and are reflected in Storage
properties on the Company’s consolidated balance sheets.
Store Location
Number of
Stores
Date Opened
Brooklyn, NY (1)
Waltham, MA (2)
Queens, NY (1)
Bayonne, NJ (1) (3)
Bronx, NY (1)
1
1
1
1
1
5
Q2 2020
Q3 2019
Q2 2019
Q2 2019
Q3 2018
F-28
CubeSmart
Ownership
Interest
100%
100%
100%
100%
100%
Total
Construction Costs
(in thousands)
$
$
45,900
18,000
47,500
25,100
92,100
228,600
(1) These stores were previously owned by four separate consolidated joint ventures, of which the Company held a 51% ownership
interest in each. On February 15, 2019, the noncontrolling member in the venture that owned the Bronx, NY store put
its 49% interest in the venture to the Company for $37.8 million. On June 25, 2019, the noncontrolling member in the venture that
owned the Bayonne, NJ store put its 49% interest in the venture to the Company for $11.5 million. On September 17, 2019, the
noncontrolling member in the venture that owned the Queens, NY store put its 49% interest in the venture to the Company
for $15.2 million. On September 29, 2020, the noncontrolling member in the venture that owned the Brooklyn, NY store put
its 49% interest in the venture to the Company for $10.0 million, of which $1.0 was paid in cash. The Company
issued 276,497 OP Units that were valued at approximately $9.0 million as consideration for the remainder of the purchase price
(see note 12). The cash payments related to these transactions are included in Development costs in the consolidated statements
of flows.
(2) On August 8, 2019, the Company, through a joint venture in which it owned a 90% interest and that it previously consolidated,
completed the construction and opened for operation a store located in Waltham, MA. On September 6, 2019, the Company
acquired the noncontrolling member’s 10% interest in the venture for $2.6 million. Prior to this transaction, the noncontrolling
member’s interest was reported in Noncontrolling interests in subsidiaries on the consolidated balance sheets. Since the Company
retained its controlling interest in the venture and the store is now wholly owned, this transaction was accounted for as an equity
transaction. The carrying amount of the noncontrolling interest was reduced to zero to reflect the purchase and the $2.0 million
difference between the purchase price paid by the Company and the carrying amount of the noncontrolling interest was recorded
as an adjustment to equity attributable to the Company, with no gain or loss recorded. In conjunction with the Company’s
acquisition of the noncontrolling interest, the $10.5 million related party loan extended by the Company to the venture during the
construction period was repaid in full.
(3) This store is subject to a ground lease.
During the fourth quarter of 2015 and the third quarter of 2017, the Company, through two separate joint ventures in which it owned a
90% interest in each and that were previously consolidated, completed the construction and opened for operation a store located in Queens,
NY and a store located in New York, NY, respectively. On June 25, 2019, the Company acquired the noncontrolling member’s 10%
interest in the venture that owned the New York, NY store for $18.5 million, and on June 28, 2019, the Company acquired the
noncontrolling member’s 10% interest in the venture that owned the Queens, NY store, for $9.0 million. Prior to these transactions, the
noncontrolling member’s interest in each venture was reported in Noncontrolling interests in subsidiaries on the consolidated balance
sheets. Since the Company retained its controlling interest in each venture and the stores are now wholly owned, these transactions were
accounted for as equity transactions. In each case, the carrying amount of the noncontrolling interest was reduced to zero to reflect the
purchase and the difference between the purchase price paid by the Company and the carrying amount of the noncontrolling interest which
aggregated to $22.6 million, was recorded as an adjustment to equity attributable to the Company, with no gain or loss recorded. The
$12.4 million related party loan extended by the Company to the venture that owned the Queens, NY store was repaid in conjunction with
the Company’s acquisition of the noncontrolling member’s ownership interest.
2019 Acquisitions
During the year ended December 31, 2019, the Company acquired 11 stores located in Arizona (1), California (1), Florida (5), Georgia
(1), Maryland (1), South Carolina (1) and Texas (1) for an aggregate purchase price of approximately $118.3 million. In connection with
these transactions, which were accounted for as asset acquisitions, the Company allocated the purchase price and acquisition related costs
to the tangible and intangible assets acquired based on fair value. Intangible assets consisted of in-place leases, which aggregated to
$6.2 million at the time of the acquisitions and prior to amortization of such amounts. The estimated life of these in-place leases was 12
months and the amortization expense that was recognized during the years ended December 31, 2020 and 2019 was approximately $4.3
million and $1.9 million, respectively. In connection with one of the acquisitions, the Company paid $14.9 million of cash and issued OP
Units that were valued at approximately $3.6 million as consideration for the purchase price (see note 12).
Additionally, on June 6, 2019, the Company acquired its partner’s 90% ownership interest in HVP III, an unconsolidated real estate
venture in which the Company previously owned a 10% noncontrolling interest and that was accounted for under the equity method of
accounting. As of the date of acquisition, HVP III owned 18 stores located in Georgia (1), Massachusetts (7), North Carolina (1), South
Carolina (7) and Tennessee (2) (the “HVP III Assets”). The purchase price for the 90% ownership interest was $128.3 million, which was
comprised of cash consideration of $120.0 million and $8.3 million of the Company’s escrowed proceeds from HVP III’s sale
of 50 properties to an unaffiliated buyer on June 5, 2019 (see note 5). The HVP III Assets were recorded by the Company at
$137.5 million, which consisted of the $128.3 million purchase price plus the Company’s $10.6 million carryover basis of its previously
held equity interest in HVP III, offset by $1.4 million of acquired cash. As a result of the transaction, which was accounted for as an asset
acquisition, the HVP III Assets became wholly-owned by the Company and are now consolidated within its financial statements. No gain
F-29
or loss was recognized as a result of the transaction. In connection with the transaction, the Company allocated the value of the HVP III
Assets and acquisition related costs to the tangible and intangible assets acquired based on fair value. Intangible assets consisted of in-
place leases, which aggregated to $14.3 million at the time of the acquisition and prior to amortization of such amounts. The estimated life
of these in-place leases was 12 months and the amortization expense that was recognized during the years ended December 31, 2020 and
2019 was approximately $6.0 million and $8.3 million, respectively.
2019 Disposition
On October 7, 2019, the Company sold a self-storage property located in Texas for a sales price of $4.1 million. The Company recorded
a $1.5 million gain in connection with the sale.
2018 Acquisitions
During the year ended December 31, 2018, the Company acquired ten stores located in California (2), Illinois (1), Nevada (1), New
York (1), North Carolina (1), Texas (3) and the District of Columbia (1), including one store upon completion of construction and the
issuance of a certificate of occupancy, for an aggregate purchase price of approximately $227.5 million. In connection with these
transactions, which were accounted for as asset acquisitions, the Company allocated a portion of the purchase price and acquisition related
costs to the tangible and intangible assets acquired based on fair value. Intangible assets consist of in-place leases, which aggregated $11.3
million at the time of the acquisitions and prior to any amortization of such amounts. The estimated life of these in-place leases was 12
months, and the amortization expense that was recognized during the years ended December 31, 2019 and 2018 was approximately $8.2
million and $3.1 million, respectively. In connection with one of the acquired stores, the Company assumed a $7.2 million mortgage loan
that was immediately repaid by the Company. The remainder of the purchase price was funded with $0.2 million of cash and $4.8 million
through the issuance of 168,011 OP Units (see note 12).
2018 Dispositions
On November 28, 2018, the Company sold two stores in Arizona for an aggregate sales price of approximately $17.5 million. In
connection with these sales, the Company recorded gains that totaled approximately $10.6 million.
5. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES
The Company’s investments in real estate ventures, in which it holds a common ownership interest, are summarized as follows (dollars
in thousands):
Unconsolidated Real Estate Ventures
191 IV CUBE Southeast LLC ("HVPSE") (1)
191 IV CUBE LLC ("HVP IV") (2)
CUBE HHF Northeast Venture LLC ("HHFNE") (3)
CUBE HHF Limited Partnership ("HHF") (4)
CubeSmart
Ownership
Number of Stores as of
December 31,
Interest
10%
20%
10%
50%
2020
14
21
13
35
83
2019
—
21
13
35
69
$
$
Carrying Value of Investment as of
December 31,
2020
2019
$
5,015
21,760
1,628
63,668
92,071 $
—
23,112
1,998
66,007
91,117
(1) On March 19, 2020, the Company invested a 10% ownership interest in a newly-formed real estate venture that acquired 14 self-
storage properties located in Florida (2), Georgia (8) and South Carolina (4). HVPSE paid $135.3 million for these stores, of
which $7.7 million was allocated to the value of the in-place lease intangible. The acquisition was funded primarily through the
venture’s $81.6 million secured term loan. The remainder of the purchase price was contributed pro-rata by the Company and its
unaffiliated joint venture partner. The Company’s total contribution to HVPSE related to this portfolio acquisition
was $5.6 million. The secured loan bears interest at LIBOR plus 1.60% and matures on March 19, 2023 with options to extend
the maturity date through March 19, 2025, subject to satisfaction of certain conditions and payment of the extension fees as
stipulated in the loan agreement.
(2) The stores owned by HVP IV are located in Arizona (2), Connecticut (2), Florida (4), Georgia (2), Maryland (1), Minnesota (1)
Pennsylvania (1) and Texas (8). The Company’s total contribution to HVP IV in connection with these store acquisitions was
$26.3 million. As of December 31, 2020, HVP IV had $82.2 million outstanding on its $107.0 million loan facility, which bears
interest at LIBOR plus 1.70% per annum, and matures on May 16, 2021 with options to extend the maturity date through May 16,
2023, subject to satisfaction of certain conditions and payment of the extension fees as stipulated in the loan agreement. As of
December 31, 2020, HVP IV also had $55.5 million outstanding under a separate secured loan that bears interest at LIBOR plus
F-30
2.75% per annum, and matures on June 9, 2022 with options to extend the maturity date through June 9, 2024, subject to
satisfaction of certain conditions and payment of the extension fees as stipulated in the loan agreement.
(3) The stores owned by HHFNE are located in Connecticut (3), Massachusetts (6), Rhode Island (2) and Vermont (2). The
Company’s total contribution to HHFNE in connection with these store acquisitions was $3.8 million. As of December 31, 2020,
HHFNE had an outstanding $45.0 million secured loan facility, which bears interest at LIBOR plus 1.20% per annum and
matures on December 16, 2024.
(4) The stores owned by HHF are located in North Carolina (1) and Texas (34). As of December 31, 2020, HHF had an outstanding
$100.0 million secured loan, which bears interest at 3.59% per annum and matures on April 30, 2021. On January 21, 2021, HHF
entered into a new $105.0 million secured loan, which bears interest at 2.58% per annum and matures on February 5, 2028. HHF
used the proceeds from the new loan to repay its existing outstanding $100.0 million loan in full.
On June 5, 2019, HVP III sold 50 stores located in Florida (3), Georgia (4), Michigan (17), North Carolina (3), South Carolina (15) and
Tennessee (8), to an unaffiliated third-party buyer for an aggregate sales price of $293.5 million. As of the transaction date, HVP III had
five mortgage loans with an aggregate outstanding balance of $22.9 million, as well as $179.5 million outstanding on its $185.5 million
loan facility, all of which were defeased or repaid in full at the time of the sale. Net proceeds to the venture from the transaction totaled
$82.9 million. The venture recorded gains which aggregated to approximately $106.7 million in connection with the sale. Subsequent to
the sale, the Company acquired its partner’s 90% ownership interest in HVP III, which at the time of the acquisition, owned the remaining
18 storage properties (see note 4).
Based upon the facts and circumstances at formation of HVPSE, HVP IV, HHFNE, and HHF (the “Ventures”), the Company
determined that the Ventures are not VIEs in accordance with the accounting standard for the consolidation of VIEs. As a result, the
Company used the voting interest model under the accounting standard for consolidation in order to determine whether to consolidate the
Ventures. Based upon each member's substantive participating rights over the activities of each entity as stipulated in the operating
agreements, the Ventures are not consolidated by the Company and are accounted for under the equity method of accounting (except for
HVP III, which was consolidated as of June 6, 2019). The Company’s investments in the Ventures are included in Investment in real estate
ventures, at equity on the Company’s consolidated balance sheets and the Company’s earnings from its investments in the Ventures are
presented in Equity in earnings (losses) of real estate ventures on the Company’s consolidated statements of operations.
The amounts reflected in the following table are based on the historical financial information of the Ventures. The following is a
summary of the financial position of the Ventures as of December 31, 2020 and 2019:
Assets
Storage properties, net
Other assets
Total assets
Liabilities and equity
Other liabilities
Debt
Equity
CubeSmart
Joint venture partners
Total liabilities and equity
(1) Excludes HVPSE as it acquired its initial assets on March 19, 2020.
December 31,
2020
2019 (1)
(in thousands)
662,833 $
18,112
680,945 $
11,588 $
359,985
92,071
217,301
680,945 $
552,791
11,997
564,788
10,064
280,392
91,117
183,215
564,788
$
$
$
$
F-31
The following is a summary of results of operations of the Ventures for the years ended December 31, 2020, 2019 and 2018:
Total revenues
Operating expenses
Other expenses
Interest expense, net
Depreciation and amortization
Gains from sale of real estate, net
Net (loss) income
Company’s share of net income (loss)
2020
For the year ended December 31,
2019
(in thousands)
2018
$
$
$
67,239 $
(30,755)
(430)
(11,585)
(33,086)
—
(8,617) $
178 $
72,582 $
(32,134)
(3,227)
(14,927)
(30,107)
106,667
98,854 $
11,122 $
90,111
(37,899)
(938)
(13,311)
(41,972)
—
(4,009)
(865)
The results of operations above include the periods from January 1, 2018 through June 6, 2019 (date of consolidation) for HVP III and
March 19, 2020 (date of initial store acquisition) through December 31, 2020 for HVPSE.
6. UNSECURED SENIOR NOTES
The Company’s unsecured senior notes are summarized as follows (collectively referred to as the “Senior Notes”):
December 31,
2020
2019
Effective
Interest Rate
Issuance
Date
Maturity
Date
Unsecured Senior Notes
$250M 4.800% Guaranteed Notes due 2022 (1)
$300M 4.375% Guaranteed Notes due 2023 (2)
$300M 4.000% Guaranteed Notes due 2025 (3)
$300M 3.125% Guaranteed Notes due 2026
$350M 4.375% Guaranteed Notes due 2029
$350M 3.000% Guaranteed Notes due 2030
$450M 2.000% Guaranteed Notes due 2031
Principal balance outstanding
Less: Discount on issuance of unsecured senior notes, net
Less: Loan procurement costs, net
Total unsecured senior notes, net
(in thousands)
— $
$
250,000
300,000
300,000
300,000
350,000
350,000
—
1,850,000
(3,860)
(10,415)
$ 2,030,372 $ 1,835,725
300,000
300,000
300,000
350,000
350,000
450,000
2,050,000
(7,470)
(12,158)
4.82 %
Jun-12
4.33 % Various (2)
3.99 % Various (3)
Aug-16
3.18 %
Jan-19
4.46 %
Oct-19
3.04 %
Oct-20
2.10 %
Jul-22
Dec-23
Nov-25
Sep-26
Feb-29
Feb-30
Feb-31
(1) On October 30, 2020, the Operating Partnership redeemed, in full, its $250.0 million of outstanding 4.800% senior notes due
2022 (the “2022 Notes”), with proceeds from its $450.0 million of 2.000% senior notes due 2031 issued on October 6, 2020. In
connection with the redemption of the 2022 Notes, the Operating Partnership recognized a loss on early debt extinguishment of
$18.0 million, of which $17.6 million represents a prepayment premium and $0.4 represents the write-off of unamortized loan
procurement costs.
(2) On April 4, 2017, the Operating Partnership issued $50.0 million of its 4.375% senior notes due 2023, which are part of the same
series as the $250.0 million principal amount of the Operating Partnership’s 4.375% senior notes due December 15, 2023 issued
on December 17, 2013. The $50.0 million and $250.0 million tranches were priced at 105.040% and 98.995%, respectively, of the
principal amount to yield 3.495% and 4.501%, respectively, to maturity. The combined weighted average effective interest rate of
the 2023 notes is 4.330%.
(3) On April 4, 2017, the Operating Partnership issued $50.0 million of its 4.000% senior notes due 2025, which are part of the same
series as the $250.0 million principal amount of the Operating Partnership’s 4.000% senior notes due November 15, 2025 issued
on October 26, 2015. The $50.0 million and $250.0 million tranches were priced at 101.343% and 99.735%, respectively, of the
principal amount to yield 3.811% and 4.032%, respectively, to maturity. The combined weighted average effective interest rate of
the 2025 notes is 3.994%.
The indenture under which the 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 more than 1.5:1.0 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
F-32
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. As of and for the year ended December 31, 2020, the
Operating Partnership was in compliance with all of the financial covenants under the Senior Notes.
7. REVOLVING CREDIT FACILITY AND UNSECURED TERM LOANS
On December 9, 2011, the Company entered into a credit agreement (the “Credit Facility”), which was subsequently amended on April
5, 2012, June 18, 2013 and April 22, 2015 to provide for, among other things, a $500.0 million unsecured revolving facility with a
maturity date of April 22, 2020. On June 19, 2019, the Company amended and restated, in its entirety, the Credit Facility (the “Amended
and Restated Credit Facility”) which, subsequent to the amendment and restatement, is comprised of a $750.0 million unsecured revolving
credit facility (the “Revolver”) maturing on June 19, 2024. Under the Amended and Restated Credit Facility, pricing on the Revolver is
dependent upon the Company’s unsecured debt credit ratings. At the Company’s current Baa2/BBB level, amounts drawn under the
Revolver are priced at 1.10% over LIBOR, inclusive of a facility fee of 0.15%. The Company incurred costs of $3.9 million in 2019 in
connection with amending and restating the Credit Facility and capitalized such costs as a component of Loan procurement costs, net of
amortization on the consolidated balance sheets.
On January 31, 2019, the Company used a portion of the net proceeds from the issuance of $350.0 million of 4.375% Senior Notes due
2029 (the “2029 Notes”) to repay all of the outstanding indebtedness under the $200.0 million unsecured term loan portion of the Credit
Facility.
As of December 31, 2020, borrowings under the Revolver had an effective weighted average interest rate of 1.24%. Additionally, as of
December 31, 2020, $631.6 million was available for borrowing under the Revolver. The available balance under the Revolver is reduced
by an outstanding letter of credit of $0.6 million.
Under the Amended and Restated Credit Facility, the Company’s ability to borrow under the Revolver is subject to ongoing compliance
with certain financial covenants which include, among other things, (1) a maximum total indebtedness to total asset value of 60.0%, and
(2) a minimum fixed charge coverage ratio of 1.5:1.0. As of and for the year ended December 31, 2020, the Operating Partnership was in
compliance with all of its financial covenants.
On June 20, 2011, the Company entered into an unsecured term loan agreement (the “Term Loan Facility”), which was subsequently
amended on June 18, 2013 and August 5, 2014, consisting of, among other things, a $100.0 million unsecured term loan that was
scheduled to mature in January 2020. On June 19, 2019, the Company used an initial advance at closing of the Amended and Restated
Credit Facility to repay all of the outstanding indebtedness under the unsecured term loan portion of the Term Loan Facility. Unamortized
loan procurement costs of $0.1 million were written off in conjunction with the repayment.
F-33
8. MORTGAGE LOANS AND NOTES PAYABLE
The Company’s mortgage loans and notes payable are summarized as follows:
Mortgage Loans and Notes Payable
Bronx VII, NY (1)
Bronx VIII, NY (1)
Bronx IX, NY
Bronx X, NY
Nashville V, TN
New York, NY
Annapolis I, MD
Brooklyn XV, NY
Long Island City IV, NY
Long Island City II, NY
Long Island City III, NY
Flushing II, NY
Principal balance outstanding
Plus: Unamortized fair value adjustment
Less: Loan procurement costs, net
Total mortgage loans and notes payable, net
Carrying Value as of
December 31,
2020
2019
(in thousands)
— $
—
21,030
23,148
2,261
29,981
5,283
15,713
12,852
19,094
19,106
54,300
202,768
15,879
(2,143)
216,504 $
7,805
2,740
21,547
24,042
2,313
30,588
5,459
—
—
—
—
—
94,494
1,833
(287)
96,040
$
$
Effective
Interest Rate
Maturity
Date
4.56 %
4.61 %
4.85 %
4.64 %
3.85 %
3.51 %
3.78 %
2.15 %
2.15 %
2.25 %
2.25 %
2.15 %
Nov-20
Nov-20
Jun-21
Jun-21
Jun-23
Jun-23
May-24
May-24
May-24
Jul-26
Aug-26
Jul-29
(1) These mortgage loans were repaid in full on November 2, 2020.
As of December 31, 2020 and 2019, the Company’s mortgage loans and notes payable were secured by certain of its self-storage
properties with net book values of approximately $539.2 million and $206.3 million, respectively. The following table represents the
future principal payment requirements on the outstanding mortgage loans and notes payable as of December 31, 2020 (in thousands):
2021
2022
2023
2024
2025
2026 and thereafter
Total mortgage payments
Plus: Unamortized fair value adjustment
Less: Loan procurement costs, net
Total mortgage loans and notes payable, net
$
$
46,383
2,426
32,591
32,329
979
88,060
202,768
15,879
(2,143)
216,504
F-34
9. ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss represents unrealized losses on interest rate swaps (see note 10 for details). The following table
summarizes the changes in accumulated other comprehensive loss for the years ended December 31, 2020 and 2019.
Beginning balance
Unrealized gains on interest rate swaps
Reclassification of realized losses on interest rate swaps (1)
Ending balance
Less: portion included in noncontrolling interests in the Operating Partnership
Total accumulated other comprehensive loss included in equity
$
$
(1) See note 10 for additional information about the effects of the amounts reclassified.
10. RISK MANAGEMENT AND USE OF FINANCIAL INSTRUMENTS
December 31,
2020
2019
(in thousands)
(737)
-
81
(656)
24
(632)
$
$
(1,039)
232
70
(737)
8
(729)
The Company’s use of derivative instruments is limited to the utilization of interest rate swap 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 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 the 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 the derivative is not highly-effective as a hedge or if a derivative ceases
to be a highly-effective hedge, the Company discontinues hedge accounting prospectively and reflects in its consolidated statement of
operations realized and unrealized gains and losses with respect to the derivative. As of December 31, 2020 and 2019, all derivative
instruments entered into by the Company had been settled.
On December 24, 2018, the Company entered into interest rate swap agreements with notional amounts that aggregated to
$150.0 million (the “Interest Rate Swaps”) to protect the Company against adverse fluctuations in interest rates by reducing exposure to
variability in cash flows relating to interest payments on a forecasted issuance of long-term debt. The Interest Rate Swaps qualified and
were designated as cash flow hedges. Accordingly, the Interest Rate Swaps were recorded on the consolidated balance sheet at fair value
and the related gains or losses were deferred in shareholders’ equity as accumulated other comprehensive income or loss. These deferred
gains and losses were amortized into interest expense during the period or periods in which the related interest payments affected earnings.
On January 24, 2019, in conjunction with the issuance of the 2029 Notes, the Company settled the Interest Rate Swaps for $0.8 million.
The $0.8 million termination premium will be reclassified from accumulated other comprehensive loss as an increase to interest expense
over the life of the 2029 Notes, which mature on February 15, 2029. The change in unrealized losses on interest rate swaps reflects a
reclassification of $0.1 million of unrealized losses from accumulated other comprehensive loss as an increase to interest expense during
2020. The Company estimates that $0.1 million will be reclassified as an increase to interest expense in 2021.
11. FAIR VALUE MEASUREMENTS
The Company applies the methods of determining 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.
F-35
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.
There were no financial assets or liabilities carried at fair value as of December 31, 2020 and 2019.
The fair values of financial instruments, including cash and cash equivalents, restricted cash, accounts receivable and accounts payable
approximate their respective carrying values as of December 31, 2020 and 2019. The aggregate carrying value of the Company’s debt was
$2,364.7 million and $1,931.8 million as of December 31, 2020 and 2019, respectively. The estimated fair value of the Company’s debt
was $2,571.3 million and $2,037.6 million as of December 31, 2020 and 2019, respectively. The fair value of debt estimates were based on
a discounted cash flow analysis assuming market interest rates for comparable obligations as of December 31, 2020 and 2019. 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.
12. NONCONTROLLING INTERESTS
Interests in Consolidated Joint Ventures
Noncontrolling interests in subsidiaries represent the ownership interests of third parties in the Company’s consolidated joint ventures.
The Company has determined that these ventures are variable interest entities, and that the Company is the primary beneficiary.
Accordingly, the Company consolidates the assets, liabilities and results of operations of the joint ventures in the table below:
Consolidated Joint Ventures
CS Vienna, LLC ("Vienna") (1)
CS 750 W Merrick Rd, LLC ("Merrick") (2)
CS Valley Forge Village Storage, LLC ("VFV") (3)
Shirlington Rd II, LLC ("SH2") (4)
CS 2087 Hempstead Tpk, LLC ("Hempstead") (2)
CS SDP Newtonville, LLC ("Newton") (3)
Shirlington Rd, LLC ("SH1") (4)
Number
of Stores
Location
Date Opened /
Estimated
Opening
CubeSmart
Ownership
December 31, 2020
Interest
Total Assets
Total Liabilities
Vienna, VA
Q2 2022 (est.)
Valley Stream, NY Q1 2022 (est.)
King of Prussia, PA Q2 2021 (est.)
Q1 2021 (est.)
East Meadow, NY Q1 2021 (est.)
Q1 2021 (est.)
Q2 2015
Newton, MA
Arlington, VA
Arlington, VA
1
1
1
1
1
1
1
7
72%
51%
70%
90%
51%
90%
90%
$
$
(in thousands)
16,424 $
12,090
18,129
18,821
22,079
17,808
14,511
119,862 $
4,981
5,269
9,806
1,046
7,576
11,289
171
40,138
(1) On December 23, 2020, the Company and the noncontrolling member contributed a previously wholly-owned operating property
(the “Vienna Operating Property”) and a parcel of land (the “Vienna Land”), respectively, to Vienna. The Vienna Operating
Property and the Vienna Land are located in close proximity to each other in Vienna, VA. The members intend to construct a new
store on the Vienna Land, which, upon completion, will be combined with the Vienna Operating Property and operated by the
venture as a single store. The Company has a related party commitment to Vienna to fund all or a portion of the construction
costs. As of December 31, 2020, the Company has funded $4.9 million of a total $17.0 million loan commitment to Vienna,
which is included in the total liabilities amount within the table above. This loan and the related interest were eliminated for
consolidation purposes.
(2) The noncontrolling members of Merrick and Hempstead have the option to put their ownership interest in the ventures to the
Company for $17.1 million and $6.6 million (the “Put Option”), respectively, within the two-year period after construction of
each store is substantially complete (the “Put Option Period”). In the event the Put Option is not exercised, the Company has
a one-year option to call the ownership interest of the noncontrolling members of Merrick and Hempstead for $17.1 million
and $6.6 million, respectively, beginning twelve months after the end of the Put Option Period. The Company, at its sole
discretion, may pay cash and/or issue OP Units, in exchange for the noncontrolling member’s interest in Merrick and Hempstead.
The Company is accreting the respective liabilities during the development periods and, as of December 31, 2020, has
accrued $4.9 million and $5.9 million, related to Merrick and Hempstead, respectively, which are included in Accounts payable,
accrued expenses and other liabilities on the Company’s consolidated balance sheets.
F-36
(3) The Company has related party commitments to VFV and Newton to fund a portion of the construction costs. As of December 31,
2020, the Company has funded $6.9 million of a total $12.4 million loan commitment to VFV and $9.6 million of a total $12.1
million loan commitment to Newton, which are included in the total liability amounts within the table above. These loans and the
related interest were eliminated for consolidation purposes.
(4) On March 7, 2019, the Company acquired the noncontrolling member’s ownership interest in SH1, inclusive of its promoted
interest in the venture, for $10.0 million. Prior to this transaction, the noncontrolling member’s interest was reported in
Noncontrolling interests in subsidiaries on the consolidated balance sheets. Since the Company retained its controlling interest in
the joint venture, this transaction was accounted for as an equity transaction. The carrying amount of the noncontrolling interest
was reduced to zero to reflect the purchase and the $9.7 million difference between the purchase price paid by the Company and
the carrying amount of the noncontrolling interest was recorded as an adjustment to equity attributable to the Company. In
conjunction with the Company’s acquisition of the noncontrolling interest in SH1, the $12.2 million related party loan extended
by the Company to the venture during the construction period was repaid in full. Subsequently, the noncontrolling member re-
acquired a 10% interest in SH1 and a 10% interest in SH2 for a combined $4.8 million, which is included in Noncontrolling
interests in subsidiaries on the consolidated balance sheets.
On May 30, 2019, the Company sold its 90% ownership interest in CS SJM E 92nd Street, LLC, a previously consolidated development
joint venture, for $3.7 million. In conjunction with the sale, $0.7 million of the $1.7 million related party loan extended by the Company to
the venture was repaid. The remaining $1.0 million was recorded as a note receivable and was repaid during the third quarter of 2019.
Additionally, as a result of the transaction, the Company was released from its obligations under the venture’s ground lease, and right-of-
use assets and lease liabilities totaling $13.4 million and $14.6 million, respectively, were removed from the Company’s consolidated
balance sheets.
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.
Additionally, with respect to redeemable ownership interests in the Operating 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 3.6% and 1.0% of the outstanding OP Units as of December 31, 2020 and 2019, respectively, were not owned by
CubeSmart, the sole 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 properties. 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 cash 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 records 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.
In two separate tranches during December 2020, the Company acquired the Storage Deluxe Assets for an aggregate purchase price of
$540.0 million. In connection with the acquisition of the Storage Deluxe Assets, the Company issued 5,272,023 OP Units valued at
approximately $175.1 million to fund a portion of the purchase price.
On September 29, 2020, the Company acquired the noncontrolling interest in a previously consolidated joint venture that owned a store
in New York for $10.0 million. In conjunction with the closing, the Company paid $1.0 million in cash and issued 276,497 OP Units,
valued at approximately $9.0 million, to pay the remaining consideration.
F-37
On December 16, 2019, the Company acquired a store in California for $18.5 million. In conjunction with the closing, the Company
paid $14.9 million and issued 106,738 OP Units, valued at approximately $3.6 million, to pay the remaining consideration.
On January 31, 2018, the Company acquired a store in Texas for $12.2 million and assumed an existing mortgage loan with an
outstanding balance of approximately $7.2 million and immediately repaid the loan. In conjunction with the closing, the Company paid
$0.2 million in cash and issued 168,011 OP Units, valued at approximately $4.8 million, to pay the remaining consideration.
On April 12, 2017, the Company acquired a store in Illinois for $11.2 million. In conjunction with the closing, the Company paid $9.7
million and issued 58,400 Class C OP Units to pay the remaining consideration. On July 23, 2018, all of the 58,400 Class C OP Units were
exchanged for an aggregate of 46,322 common units of the Operating Partnership.
As of December 31, 2020 and 2019, 7,420,828 and 1,972,308 OP Units, respectively, were held by third parties. The per unit cash
redemption amount of the outstanding OP Units was calculated based upon the closing price of the common shares of CubeSmart on the
New York Stock Exchange on the final trading day of the year. Based on the Company’s evaluation of the redemption value of the
redeemable noncontrolling interests, the Company has reflected these interests at the greater of the carrying value based on the
accumulation of historical cost or the redemption value as of December 31, 2020 and 2019. As of December 31, 2020 and 2019, the
Operating Partnership recorded an increase to OP Units owned by third parties and a corresponding decrease to capital of $4.2 million and
$5.9 million, respectively.
13. LEASES
CubeSmart as Lessor
The Company derives revenue primarily from rents received from customers who rent cubes at its self-storage properties under month-
to-month leases for personal or business use. The self-storage lease agreements utilized by the Company vary slightly to comply with
state-specific laws and regulations, but generally provide for automatic monthly renewals, flexibility to increase rental rates over time as
market conditions permit and the collection of contingent fees such as administrative and late fees. None of the self-storage lease
agreements contain options that allow the customer to purchase the leased space at any time during, or at the expiration of, the lease term.
All self-storage leases in which the Company serves as lessor have been classified as operating leases. Accordingly, storage cubes are
carried at historical cost less accumulated depreciation and impairment, if any, and are included in Storage properties on the Company’s
consolidated balance sheets. Operating lease income for amounts received under the Company’s self-storage lease agreements is
recognized on a straight-line basis which, due to the month-to-month nature of the leases, results in the recognition of income during the
initial term and each subsequent monthly renewal using the then-in-place rent amount. Operating lease income is included in Rental
income within the Company’s consolidated statements of operations. Variable lease income related to the Company’s self-storage lease
agreements consists of administrative and late fees charged to customers. For the years ended December 31, 2020 and 2019, administrative
and late fees totaled $20.0 million and $22.6 million, respectively, and are included in Other property related income within the
Company’s consolidated statements of operations.
CubeSmart as Lessee
The Company serves as lessee in lease agreements for land, office space, automobiles and certain equipment, which have remaining
lease terms of up to 44 years. Certain of the Company’s leases contain provisions that (1) provide for one or more options to renew, with
renewal options that can extend the lease term up to 69 years, (2) allow for early termination at certain points during the lease term and/or
(3) give the Company the option to purchase the leased property. In all cases, the exercise of the lease renewal, termination and purchase
options, if provided for in the lease, are at the Company’s sole discretion. Certain of the Company’s lease agreements, particularly its land
leases, require rental payments that are periodically adjusted for inflation using a defined index. None of the Company’s lease agreements
contain any material residual value guarantees or material restrictive covenants. Lease expense for payments related to the Company’s
finance leases is recognized as interest expense using the interest method over the related lease term. Lease expense for payments related
to the Company’s operating leases is recognized on a straight-line basis over the related lease term, which includes options to extend or
terminate the lease when it is reasonably certain that the Company will exercise that option.
Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the
Company’s obligation to make lease payments as specified in the lease. Right-of-use assets and lease liabilities related to the Company’s
leases are recognized at the lease commencement date based on the present value of the remaining lease payments over the lease term. As
the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available
surrounding the Company’s unsecured borrowing rates and implied secured spread at the lease commencement date in determining the
F-38
present value of lease payments. The right-of-use asset also includes any lease payments made at or before lease commencement less any
lease incentives.
For the years ended December 31, 2020 and 2019, the Company’s lease cost consists of the following components:
Finance lease cost:
Amortization of finance lease right-of-use assets
Interest expense related to finance lease liabilities
Operating lease cost
Short-term lease cost (1)
Total lease cost
Year Ended December 31,
2020
2019
$
$
49
64
2,856
1,114
4,083
$
$
—
—
3,304
1,227
4,531
(1) Represents automobile leases that have a lease term of 12 months. The Company has made an accounting policy election not to
apply the recognition requirements of ASC 842 to this asset class. The lease cost associated with these leases is recognized on a
straight-line basis over the related lease term.
The following table represents supplemental balance sheet information related to leases as of December 31, 2020 and 2019:
Finance Leases
Right-of-use assets included in Storage properties, net
Lease liabilities included in Lease liabilities - finance leases
Operating Leases
Right-of-use assets included in Other assets, net
Lease liabilities included in Accounts payable, accrued expenses and other liabilities
Weighted Average Lease Term (in years)
Finance leases
Operating leases
Weighted Average Discount Rate
Finance leases
Operating leases
December 31,
2020
2019
(dollars in thousands)
$
$
41,896
65,599
$
$
—
—
$
$
55,302
53,595
$
$
41,698
46,391
43.5
34.8
—
35.9
3.25 %
4.46 %
— %
4.74 %
The following table represents the future lease liability maturities as of December 31, 2020 (in thousands):
2021
2022
2023
2024
2025
2026 and thereafter
Total lease payments
Less: Imputed interest
Present value of lease liabilities
$
$
Finance
Operating
1,936 $
2,183
2,183
2,183
2,224
122,932
133,641
(68,042)
65,599 $
2,511
2,639
2,690
2,540
2,539
99,290
112,209
(58,614)
53,595
As of December 31, 2020, the Company has not entered into any lease agreements that are set to commence in the future.
F-39
14. RELATED PARTY TRANSACTIONS
The Company provides management services to certain joint ventures and other related parties. Management agreements provide for fee
income to the Company based on a percentage of revenues at the managed stores. Total management fees for unconsolidated real estate
ventures or other entities in which the Company held an ownership interest for the years ending December 31, 2020, 2019 and 2018 were
$3.8 million, $4.0 million and $4.5 million, respectively.
The management agreements for certain joint ventures, other related parties and third-party stores provide for the reimbursement to the
Company for certain expenses incurred to manage the stores. These reimbursements consist of amounts due for management fees, payroll
and other store expenses. The amounts due to the Company were $13.1 million and $10.5 million as of December 31, 2020 and 2019,
respectively, and are included in Other Assets, net on the Company’s consolidated balance sheets. Additionally, as discussed in note 12,
the Company had outstanding mortgage loans receivable from consolidated joint ventures of $21.4 million and $3.1 million as of
December 31, 2020 and 2019, respectively, which are eliminated for consolidation purposes. The Company believes that all of these
related-party receivables are fully collectible.
The HVPSE, HVP IV and HHFNE operating agreements provide for acquisition, disposition and other fees payable from HVPSE, HVP
IV and HHFNE to the Company upon the closing of a property transaction by HVPSE, HVP IV and HHFNE, or any of their subsidiaries
and completion of certain measures as defined in the operating agreements. During the years ended December 31, 2020, 2019 and 2018,
the Company recognized $0.7 million, $2.1 million and $0.6 million, respectively, in fees associated with property transactions (including
fees associated with HVP III). Property transaction fees are included in Other income on the consolidated statements of operations.
15. COMMITMENTS AND CONTINGENCIES
Development Commitments
The Company has agreements with developers for the construction of six new self-storage properties (see note 4), which will require
payments of approximately $48.4 million, due in installments upon completion of certain construction milestones, during 2021 and 2022.
Litigation
The Company is involved in claims from time to time, which arise in the ordinary course of business. In accordance with applicable
accounting guidance, management establishes an accrued liability for claim expenses, insurance retention and litigation costs when those
matters present loss contingencies that are both probable and reasonably estimable. In such cases, there may be exposure to loss in excess
of those amounts accrued. The estimated loss, if any, is based upon currently available information and is subject to significant judgment,
a variety of assumptions and known and unknown uncertainties. In the opinion of management, the Company has made adequate
provisions for potential liabilities, arising from any such matters, which are included in Accounts payable, accrued expenses and other
liabilities on the Company’s consolidated balance sheets.
16. SHARE-BASED COMPENSATION PLANS
On June 1, 2016 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 and subsequently amended with
shareholder approval on June 2, 2010 (as amended and restated, the “2007 Plan”). The purpose of the 2007 Plan 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 2007 Plan provides for the grant of share options, share appreciation rights, restricted shares,
restricted share units, performance awards, which may be denominated in cash or shares, included restricted shares and restricted share
units, and other share-based awards, including unrestricted common shares or awards denominated or payable in, or valued in whole or
part by reference to, common shares. 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 2007 Plan may be non-qualified share options or incentive share
options.
Upon shareholder approval of the amendment and restatement of the 2007 Plan on June 1, 2016, 4,500,000 additional common shares
were made available for award under the 2007 Plan. As a result, these 4,500,000 additional shares, together with the 991,117 shares that
remained available for future awards under the 2007 Plan at the time of the shareholder approval, plus any common shares that are restored
to availability upon expiration or forfeiture of outstanding options or restricted share awards, would constitute the “Aggregate Share
F-40
Reserve”. As of December 31, 2020: (i) 3,233,009 common shares remained available for future awards under the 2007 Plan; (ii) 664,364
unvested restricted share awards were outstanding under the 2007 Plan; and (iii) 2,118,090 common shares were subject to outstanding
options under the 2007 Plan (with the outstanding options having a weighted average exercise price of $26.37 per share and a weighted
average term to maturity of 6.39 years).
Prior to the June 1, 2016 amendment, the 2007 Plan used a “Fungible Units” methodology for computing the maximum number of
common shares available for issuance under the 2007 Plan. The Fungible Units methodology assigned weighted values to different types
of awards under the 2007 Plan without assigning specific numerical limits for different types of awards. As amended on June 1, 2016, the
2007 Plan provides that any common shares made the subject of awards under the 2007 Plan will count against the Aggregate Share
Reserve as one (1) unit. The Aggregate Share Reserve and the computation of the number of common shares available for issuance is
subject to adjustment upon certain corporate transactions or events, including share splits, reverse share splits and recapitalizations. The
number of shares counted against the Aggregate Share Reserve 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 the award that expires, is forfeited or that otherwise terminates, as the case may be, again
becomes available for issuance under the 2007 Plan.
The 2007 Plan is 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 2007 Plan and, subject to its right to delegate
authority to grant awards, determines the terms and provisions of option grants and share awards.
Subject to adjustment upon certain corporate transactions or events, a participant (other than a non-employee trustee) may not receive
awards under the 2007 Plan in any one calendar year covering more than 1,000,000 shares. Subject to adjustment upon certain corporate
transactions or events, a non-employee trustee may not receive awards under the 2007 Plan in any one calendar year covering more than
250,000 shares.
Under the 2007 Plan, the Compensation Committee determines the vesting schedule of each share award and option, subject to a one-
year minimum vesting requirement, but with permitted acceleration of vesting in the event of a participant’s death or disability, or in the
event of a change in control or certain changes in our capital structure. Notwithstanding the foregoing one-year minimum vesting
limitation, up to five percent of the shares subject to the Aggregate Share Reserve may be subject to awards that are not subject to such
limitation. 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.
On October 19, 2004, the Company’s sole shareholder approved a share-based employee compensation plan, the 2004 Equity Incentive
Plan (the “2004 Plan”). The 2004 Plan expired in October 2014. Prior to its expiration, a total of 3.0 million common shares were reserved
for issuance under the 2004 Plan. Subsequent to its expiration, no new equity awards may be granted under the 2004 Plan, and to the
extent that options expire unexercised or are terminated, surrendered or canceled, the options and share awards no longer become available
for future grants under the 2004 Plan.
Share Options
The fair values for options granted in 2020, 2019 and 2018 were estimated at the time the options were granted using the Black-Scholes
option-pricing model applying the following weighted average assumptions:
Assumptions:
2020
2019
2018
Risk-free interest rate
Expected dividend yield
Volatility (1)
Weighted average expected life of the options (2)
Weighted average grant date fair value of options granted per
1.9 %
3.9 %
20.00 %
6.0 years
2.7 %
3.9 %
32.00 %
6.0 years
2.5 %
3.7 %
32.00 %
6.0 years
share
$
3.66
$
6.35
$
6.24
(1) Expected volatility is based upon the level of volatility historically experienced.
(2) Expected life is based upon our expectations of share option recipients’ expected exercise and termination patterns.
F-41
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 share price volatility. Volatility for the 2020, 2019 and
2018 grants was based on the trading history of the Company’s shares.
In 2020, 2019 and 2018, the Company recognized compensation expense related to options issued to employees and executives of
approximately $2.0 million, $1.8 million and $1.5 million, respectively, which is included in General and administrative expense on the
Company’s consolidated statements of operations. During 2020, 607,010 share options were issued for which the fair value of the options
at their respective grant dates was approximately $2.2 million. The share options vest over three years. As of December 31, 2020, the
Company had approximately $2.1 million of unrecognized option compensation cost related to all grants that will be recorded over the
next two years.
The table below summarizes the option activity under the 2004 Plan and the 2007 Plan for the years ended December 31, 2020, 2019
and 2018:
The table below summarizes the option activity under the 2004 Plan
Balance at December 31, 2017
Options granted
Options canceled
Options exercised
Balance at December 31, 2018
Options granted
Options exercised
Balance at December 31, 2019
Options granted
Options canceled
Options exercised
Balance at December 31, 2020
Vested or expected to vest at December 31, 2020
Exercisable at December 31, 2020
Number of Shares
Upon Option
Weighted Average
Strike Price
Weighted Average
Remaining
Contractual Term
(years)
1,833,173 $
305,805
(74,748)
(405,227)
1,659,003 $
324,409
(381,059)
1,602,353 $
607,010
(29,814)
(61,459)
2,118,090 $
2,118,090 $
1,235,816 $
16.55
27.85
26.95
9.47
19.89
28.69
9.67
24.10
31.48
30.46
15.65
26.37
26.37
23.46
5.26
9.08
—
1.98
5.52
9.01
1.00
6.26
9.01
—
2.55
6.39
6.39
4.78
As of December 31, 2020, the aggregate intrinsic value of options outstanding, of options that vested or are expected to vest, and of
options that were exercisable was approximately $15.3 million. The aggregate intrinsic value of options exercised was approximately $0.9
million, $9.1 million and $8.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.
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. There were 188,371 restricted shares and share units issued during the year ended December 31, 2020, which
vest over three to five years. The fair value of the restricted shares and share units issued during the year ended December 31, 2020 was
approximately $6.1 million at their respective grant dates. There were 180,607 restricted shares and share units issued during the year
ended December 31, 2019 for which the fair value of the restricted shares and share units at their respective grant dates was approximately
$5.8 million. As of December 31, 2020 the Company had approximately $6.0 million of remaining unrecognized restricted share and share
unit compensation costs that will be recognized over the next five years. Restricted share awards are considered to be performance awards
and are valued using the share price on the grant date. The compensation expense recognized related to these awards and remaining
unrecognized compensation costs are included in the amounts disclosed above.
F-42
During the years ended December 31, 2020, 2019 and 2018, the Company recognized compensation expense related to restricted shares
and share units issued to employees and Trustees of approximately $5.2 million, $4.9 million and $4.0 million, respectively; these amounts
were recorded in general and administrative expense. The following table presents non-vested restricted share and share unit activity
during 2020:
Non-Vested at January 1, 2020
Granted
Vested
Forfeited
Non-Vested at December 31, 2020
Number of Non-
Vested Restricted
Shares and Share Units
489,964
188,371
(74,860)
(20,072)
583,403
On January 1, 2020, 54,978 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 REITs over a three-year period. The fair value of the restricted share units on the grant date was approximately $2.2 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, 2022. The compensation expense recognized related to these awards and
remaining unrecognized compensation costs are included in the amounts disclosed above.
On January 1, 2019, 55,168 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 REITs over a three-year period. The fair value of the restricted share units on the grant date was approximately $2.1 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, 2021. The compensation expense recognized related to these awards and
remaining unrecognized compensation costs are included in the amounts disclosed above.
On January 23, 2018, 66,872 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 REITs over a three-year period. The fair value of the restricted share units on the grant date was approximately $1.9
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, 2020. The compensation expense recognized related to these awards
and remaining unrecognized compensation costs are included in the amounts disclosed above.
17. EARNINGS PER SHARE AND UNIT AND SHAREHOLDERS’ EQUITY AND CAPITAL
Earnings per common share and shareholders’ equity
The following is a summary of the elements used in calculating basic and diluted earnings per common share:
Net income
Noncontrolling interests in the Operating Partnership
Noncontrolling interest in subsidiaries
Net income attributable to the Company’s common shareholders
$
$
2020
For the year ended December 31,
2019
(dollars and shares in thousands, except per share amounts)
165,488
(1,820)
221
163,889
167,611 $
(1,825)
(165)
165,621 $
170,771 $
(1,708)
54
169,117 $
2018
Weighted average basic shares outstanding
Share options and restricted share units
Weighted average diluted shares outstanding (1)
194,147
796
194,943
190,874
702
191,576
184,653
842
185,495
Basic earnings per share attributable to common shareholders
Diluted earnings per share attributable to common shareholders (2)
$
$
0.85 $
0.85 $
0.89 $
0.88 $
0.89
0.88
F-43
Earnings per common unit and capital
The following is a summary of the elements used in calculating basic and diluted earnings per common unit:
For the year ended December 31,
2019
(dollars and units in thousands, except per unit amounts)
2018
2020
Net income
Operating Partnership interests of third parties
Noncontrolling interest in subsidiaries
Net income attributable to common unitholders
Weighted average basic units outstanding
Unit options and restricted share units
Weighted average diluted units outstanding (1)
$
$
167,611 $
(1,825)
(165)
165,621 $
170,771 $
(1,708)
54
169,117 $
194,147
796
194,943
190,874
702
191,576
165,488
(1,820)
221
163,889
184,653
842
185,495
Basic earnings per unit attributable to common unitholders
Diluted earnings per unit attributable to common unitholders (2)
$
$
0.85 $
0.85 $
0.89 $
0.88 $
0.89
0.88
(1) For the years ended December 31, 2020, 2019 and 2018, the Company declared cash dividends per common share/unit of $1.33,
$1.29 and $1.22, respectively.
(2) The amounts of anti-dilutive options that were excluded from the computation of diluted earnings per share/unit as the exercise
price was higher than the average share price of the Company for the years ended December 31, 2020 and 2018 were 0.8 million
and 0.2 million, respectively. There were no anti-dilutive options for the year ended December 31, 2019.
The OP units and common units have essentially the same economic characteristics as they share 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 7,420,828; 1,972,308
and 1,945,570 as of December 31, 2020, 2019 and 2018, respectively. There were 197,405,989; 193,557,024 and 187,145,103 common
units outstanding as of December 31, 2020, 2019 and 2018, respectively.
Common Shares
The Company maintains an at-the-market equity program that enables it to offer and sell up to 60.0 million common shares through
sales agents pursuant to equity distribution agreements (the “Equity Distribution Agreements”). The Company’s sales activity under the
program for the years ended December 31, 2020, 2019 and 2018 is summarized below:
For the year ended December 31,
2019
(dollars and shares in thousands, except per share amounts)
2020
2018
Number of shares sold
Average sales price per share
Net proceeds after deducting offering costs
$
$
3,627
33.69 $
120,727 $
5,899
33.64 $
196,304 $
4,291
31.09
131,835
The proceeds from the sales of common shares under the program during the years ended December 31, 2020, 2019 and 2018 were used
to fund acquisitions of storage properties and for general corporate purposes. As of December 31, 2020, 2019 and 2018, 10.9 million
common shares, 4.6 million common shares and 10.5 million common shares, respectively, remained available for issuance under the
Equity Distribution Agreements.
18. INCOME TAXES
Deferred income taxes are established for temporary differences between the 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 as of December 31, 2020 or 2019. As of December 31, 2020 and 2019, the Company had
net deferred tax assets of $0.4 million and $0.8 million, respectively, which are included in Other assets, net on the Company’s
consolidated balance sheets. The Company believes it is more likely than not the deferred tax assets will be realized.
F-44
CUBESMART
SCHEDULE III
REAL ESTATE AND RELATED DEPRECIATION
December 31, 2020
(dollars in thousands)
Initial Cost
Buildings
&
Costs
Subsequent
to
Gross Carrying Amount at
December 31, 2020
Buildings
Accumulated
Depreciation
(A)
Description
Chandler I, AZ
Chandler II, AZ
Gilbert I, AZ
Gilbert II, AZ
Glendale, AZ
Green Valley, AZ
Mesa I, AZ
Mesa II, AZ
Mesa III, AZ
Peoria, AZ
Phoenix III, AZ
Phoenix IV, AZ
Queen Creek, AZ
Scottsdale, AZ
Surprise , AZ
Tempe I, AZ
Tempe II, 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
Benicia, CA
Citrus Heights, CA
Corona, CA
Diamond Bar, CA
Escondido, CA
Fallbrook, CA
Fremont, CA
Lancaster, CA
Long Beach I, CA
Long Beach II, CA
Los Angeles, CA
Murrieta, CA
North Highlands, CA
Ontario, CA
Orangevale, 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 Diego, CA
San Marcos, CA
Santa Ana, CA
South Sacramento, CA
Spring Valley, CA
Temecula I, CA
Temecula II, CA
Vista I, CA
Vista II, CA
Walnut, CA
West Sacramento, CA
Westminster, CA
Aurora, CO
Centennial, CO
Colorado Springs I, CO
Colorado Springs II, CO
Denver I, CO
Denver II, CO
Denver III, CO
Federal Heights, CO
Golden, CO
Littleton, CO
Northglenn, CO
Square
Footage
47,880
82,905
57,075
114,530
56,807
25,050
52,575
45,511
59,209
110,780
121,855
69,710
94,442
108,240
72,575
77,543
68,409
59,800
43,950
49,820
48,040
45,184
40,766
52,663
46,650
67,496
46,350
42,700
42,275
45,800
48,995
74,770
75,620
95,474
103,488
143,645
45,926
51,189
60,475
124,541
71,130
77,023
49,775
57,094
93,490
50,542
83,600
53,978
57,391
99,783
67,320
85,101
59,944
50,764
111,831
31,070
41,426
35,416
83,352
56,803
78,695
111,833
87,287
37,425
63,931
52,390
55,085
81,340
84,520
74,238
147,723
50,664
39,765
68,293
75,717
62,400
47,975
62,400
59,200
74,420
76,025
54,848
87,800
53,490
43,102
Encumbrances Land
327
1,518
951
1,199
201
298
920
731
706
1,436
2,115
930
1,159
443
584
941
588
188
188
532
674
515
440
670
589
724
424
439
671
587
707
2,392
1,633
2,107
2,522
3,040
133
1,158
390
3,138
3,424
23,289
1,883
868
1,705
1,423
2,799
1,094
899
277
1,351
1,170
1,284
1,152
2,085
51
112
98
1,872
783
1,475
1,691
1,185
775
1,223
790
1,178
660
3,080
711
4,629
1,578
1,222
1,740
1,343
1,281
771
657
673
1,430
1,828
878
1,683
1,268
862
Improvements Acquisition
642
239
212
180
1,393
286
463
420
510
263
458
119
107
6,283
192
850
2,167
1,167
1,166
397
455
424
336
443
483
521
391
451
420
376
538
579
328
421
395
344
1,975
199
1,146
1,151
250
146
341
692
483
432
623
513
375
1,894
675
574
513
527
709
1,219
1,439
1,371
482
752
522
766
301
274
542
488
1,028
1,310
1,254
2,508
511
529
275
401
641
119
554
291
617
190
99
359
633
435
609
1,257
7,485
4,688
11,846
2,265
1,153
2,739
2,176
2,101
7,082
10,429
12,277
5,716
4,879
3,761
3,283
2,898
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
7,028
4,793
10,385
7,404
11,804
1,492
5,711
2,247
14,368
13,987
25,867
5,532
2,546
8,401
4,175
8,222
3,212
4,118
3,098
6,183
5,359
3,767
3,380
6,750
572
1,251
1,093
5,391
3,583
6,753
7,741
16,740
2,288
5,600
2,319
5,394
4,735
5,839
4,076
13,599
4,635
3,590
5,142
2,986
8,958
1,717
2,674
2,741
7,053
12,109
1,953
3,744
2,820
1,917
Land
327
1,518
951
1,199
418
298
921
731
706
1,436
2,115
930
1,159
883
584
941
588
384
391
533
675
515
430
670
589
725
425
439
672
587
708
2,392
1,634
2,107
2,524
3,040
432
1,158
556
3,138
3,424
23,289
1,903
868
1,705
1,423
2,799
1,095
899
672
1,351
1,170
1,284
1,152
2,086
182
306
242
1,872
783
1,290
1,692
1,186
776
1,223
791
1,178
899
3,080
1,118
4,629
1,595
1,222
1,743
1,343
1,281
771
656
646
1,430
1,828
879
1,684
1,268
662
F-45
&
Improvements Total
1,868
1,541
9,239
7,721
5,846
4,895
13,225
12,026
3,488
3,070
1,378
1,080
3,677
2,756
2,998
2,267
2,934
2,228
8,780
7,344
13,001
10,886
13,326
12,396
6,983
5,824
10,927
10,044
4,537
3,953
4,556
3,615
5,653
5,065
3,125
2,741
3,150
2,759
2,344
1,811
2,961
2,286
2,302
1,787
1,936
1,506
2,936
2,266
2,657
2,068
3,149
2,424
1,932
1,507
2,057
1,618
2,903
2,231
2,529
1,942
3,068
2,360
7,909
5,517
5,301
3,667
12,912
10,805
8,171
5,647
12,828
9,788
3,353
2,921
7,069
5,911
3,213
2,657
16,721
13,583
17,661
14,237
49,302
26,013
6,131
4,228
3,286
2,418
10,589
8,884
4,764
3,341
9,223
6,424
3,823
2,728
4,817
3,918
4,864
4,192
7,377
6,026
6,298
5,128
4,436
3,152
4,017
2,865
8,297
6,211
1,640
1,458
2,441
2,135
2,205
1,963
6,526
4,654
4,586
3,803
7,814
6,524
8,246
6,554
18,226
17,040
2,645
1,869
6,571
5,348
2,851
2,060
6,856
5,678
6,089
5,190
9,237
6,157
6,363
5,245
14,762
10,133
5,366
3,771
4,014
2,792
5,675
3,932
4,069
2,726
10,358
9,077
2,522
1,751
3,113
2,457
3,526
2,880
8,641
7,211
14,036
12,208
2,609
1,730
5,019
3,335
3,751
2,483
2,780
2,118
Year
Acquired/
Developed
2005
2013
2013
2016
1998
2005
2006
2006
2006
2015
2014
2016
2015
1998
2015
2005 / 2019
2013
1998
1998
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2014
2005
2007
1997
2014
2001
2006
2019
2018
2005
2005
2014
2005
2005
2005
2006
1997
2006
2006
2005
2005
2005/2017
1997
1997
1997
2005
2006
2006
2006
2018
2005
2006
2005
2006
1998
2007
2001
2005
2005
2005
2005
2005
2016
2005
2006
2006
2012
2016
2005
2005
2005
2005
598
1,795
1,206
1,456
1,636
413
1,348
1,112
1,072
1,333
2,361
1,486
1,083
3,170
641
996
1,475
1,525
1,502
712
910
743
599
923
820
998
606
746
886
811
990
2,083
1,460
2,084
2,231
4,082
1,606
1,331
1,273
6,388
394
1,566
1,648
957
1,787
1,350
2,363
1,073
1,820
2,405
2,869
2,411
1,312
1,126
1,640
793
1,152
1,103
1,817
1,798
3,115
3,183
1,114
727
2,524
818
2,695
2,467
2,368
2,482
3,838
1,461
1,112
1,623
1,075
1,243
709
1,198
1,314
1,894
1,621
714
1,375
991
823
Initial Cost
Buildings
&
Costs
Subsequent
to
Gross Carrying Amount at
December 31, 2020
Buildings
&
Accumulated
Depreciation
(A)
Description
Bloomfield, CT
Branford, CT
Bristol, CT
East Windsor, CT
Enfield, CT
Gales Ferry, CT
Manchester I, CT
Manchester II, CT
Manchester III, CT
Milford, CT
Monroe, CT
Mystic, CT
Newington I, CT
Newington II, CT
Norwalk I, CT
Norwalk II, CT
Old Saybrook I, CT
Old Saybrook II, CT
Shelton, CT
South Windsor, CT
Stamford, CT
Wilton, CT
Washington I, DC
Washington II, DC
Washington III, DC
Washington IV, DC
Washington V, DC
Boca Raton, FL
Boynton Beach I, FL
Boynton Beach II, FL
Boynton Beach III, FL
Boynton Beach IV, FL
Bradenton I, FL
Bradenton II, FL
Cape Coral I, FL
Cape Coral II, FL
Coconut Creek I, FL
Coconut Creek II, FL
Dania Beach, FL
Dania, FL
Davie, FL
Deerfield Beach, FL
Delray Beach I, FL
Delray Beach II, FL
Delray Beach III, FL
Delray Beach IV, FL
Edgewater, FL
Ft. Lauderdale I, FL
Ft. Lauderdale II, FL
Ft. Myers I, FL
Ft. Myers II, FL
Ft. Myers III, FL
Ft. Myers IV, FL
Ft. Myers V, FL
Jacksonville I, FL
Jacksonville II, FL
Jacksonville III, FL
Jacksonville IV, FL
Jacksonville V, FL
Jacksonville VI, FL
Kendall, FL
Lake Worth I, FL
Lake Worth II, FL
Lake Worth III, FL
Lakeland, FL
Leisure City, FL
Lutz I, FL
Lutz II, FL
Margate I, FL
Margate II, FL
Merritt Island, FL
Miami I, FL
Miami II, FL
Miami III, FL
Miami IV, FL
Miramar, FL
Naples I, FL
Naples II, FL
Naples III, FL
Naples IV, FL
New Smyrna Beach I, FL
New Smyrna Beach II, FL
North Palm Beach, FL
Oakland Park, FL
Ocoee, FL
Orange City, FL
Orlando II, FL
Orlando III, FL
Orlando IV, FL
Orlando V, FL
Orlando VI, FL
Orlando VII, FL
Orlando VIII, FL
Square
Footage
48,700
50,629
53,425
45,816
52,875
54,905
46,925
52,725
60,103
44,885
63,700
50,850
42,270
35,640
30,166
82,225
86,975
26,425
78,405
72,075
28,907
84,526
62,685
82,452
78,215
71,948
114,200
37,968
61,765
61,484
67,368
76,564
68,389
88,063
76,857
67,955
78,846
90,137
180,776
58,315
80,985
57,280
67,545
75,788
94,210
97,208
98,375
70,343
49,662
67,504
83,325
81,554
70,051
62,370
79,735
65,129
65,780
95,605
82,593
70,795
75,495
158,754
86,884
92,510
53,629
56,185
71,595
69,232
53,660
65,380
66,996
46,500
66,860
151,420
76,695
80,080
48,100
65,850
80,205
40,725
87,504
109,355
45,800
63,706
76,150
59,580
63,184
101,190
76,801
75,377
67,275
78,610
126,225
Improvements Acquisition
2,439
1,731
445
579
512
1,690
569
451
200
1,368
946
2,198
315
372
70
467
743
302
571
1,560
207
816
1,045
469
121
274
177
1,677
2,017
621
320
179
458
1,212
2,650
115
205
214
1,827
1,775
1,372
2,047
855
284
190
37
1
2,641
112
1,012
189
241
168
129
216
228
1,081
1,238
493
170
497
7,838
210
249
1,542
277
463
440
2,385
2,215
722
1,934
1,965
1,017
1,051
190
2,788
4,425
4,319
701
350
1
63
59
344
366
263
975
207
149
176
211
1
880
2,433
3,161
1,294
2,424
2,697
3,096
1,730
3,308
1,050
3,483
1,645
1,840
1,584
3,187
15,422
5,374
1,973
9,032
1,127
3,374
12,261
12,759
13,612
15,438
20,417
18,770
3,054
3,796
2,968
6,037
7,171
3,324
5,561
2,769
5,387
5,863
9,549
10,324
2,068
7,183
2,999
4,539
4,718
10,286
14,384
12,251
3,646
4,250
3,329
5,080
5,658
8,287
7,763
5,362
7,004
7,409
8,049
8,210
3,725
8,106
6,597
7,654
4,716
896
2,018
2,478
2,868
1,763
1,473
4,762
1,999
2,544
13,185
10,494
5,944
1,010
1,652
1,561
2,980
6,215
11,869
7,649
10,145
3,705
3,209
4,576
7,768
3,587
4,685
3,154
9,142
12,685
Land
360
504
1,819
744
473
489
563
996
671
274
2,004
410
1,059
911
646
1,171
3,092
1,135
1,613
272
1,941
2,421
894
3,154
4,469
6,369
13,917
813
958
1,030
1,225
1,455
1,170
1,931
830
1,093
1,189
1,937
3,584
481
1,373
1,311
883
957
2,086
2,208
1,362
1,384
862
328
1,030
1,148
992
950
1,862
950
1,670
1,651
1,220
755
2,350
354
1,552
957
256
409
901
992
399
383
2,575
484
561
4,577
1,963
1,206
270
558
598
407
1,261
1,514
1,374
3,007
1,286
1,191
1,589
1,209
633
950
640
896
2,208
Encumbrances Land
78
217
1,819
744
424
240
540
996
671
87
2,004
136
1,059
911
646
1,171
3,092
1,135
1,613
90
1,941
2,409
871
3,152
4,469
6,359
13,908
529
667
1,030
1,225
1,455
1,180
1,931
472
1,093
1,189
1,937
3,584
205
1,268
946
798
957
2,086
2,208
1,362
937
862
303
1,030
1,148
992
950
1,862
950
860
870
1,220
755
2,350
183
1,552
957
81
409
901
992
161
132
2,450
179
253
4,577
1,852
1,206
90
148
139
262
1,261
1,514
1,374
3,007
1,286
1,191
1,589
1,209
633
950
640
896
2,208
F-46
Improvements Total
2,695
3,451
2,608
1,381
2,154
3,660
2,666
1,579
3,508
1,914
3,089
3,068
1,547
1,412
3,241
15,889
4,228
1,579
8,519
2,281
2,471
13,137
11,079
12,305
15,559
20,681
18,938
3,621
4,472
2,864
6,358
7,351
2,962
5,094
4,079
5,502
6,031
9,764
9,589
3,143
6,263
4,529
4,105
4,996
10,477
14,421
12,252
5,597
4,364
3,338
5,269
5,899
8,455
7,892
4,399
5,675
6,078
7,204
6,958
3,894
6,830
11,180
7,863
4,966
1,846
2,283
2,323
2,546
3,466
3,052
4,522
2,918
3,670
11,155
9,983
6,132
3,252
5,377
4,233
3,084
6,564
11,870
7,712
10,204
3,188
2,786
3,776
7,355
3,290
4,780
3,330
9,353
12,686
3,055
3,955
4,427
2,125
2,627
4,149
3,229
2,575
4,179
2,188
5,093
3,478
2,606
2,323
3,887
17,060
7,320
2,714
10,132
2,553
4,412
15,558
11,973
15,459
20,028
27,050
32,855
4,434
5,430
3,894
7,583
8,806
4,132
7,025
4,909
6,595
7,220
11,701
13,173
3,624
7,636
5,840
4,988
5,953
12,563
16,629
13,614
6,981
5,226
3,666
6,299
7,047
9,447
8,842
6,261
6,625
7,748
8,855
8,178
4,649
9,180
11,534
9,415
5,923
2,102
2,692
3,224
3,538
3,865
3,435
7,097
3,402
4,231
15,732
11,946
7,338
3,522
5,935
4,831
3,491
7,825
13,384
9,086
13,211
4,474
3,977
5,365
8,564
3,923
5,730
3,970
10,249
14,894
Year
Acquired/
Developed
1997
1995
2005
2005
2001
1995
2002
2005
2014
1996
2005
1996
2005
2005
2012
2016
2005
2005
2011
1996
2005
2012
2008
2011
2016
2017
2018
2001
2001
2005
2014
2015
2004
2004
2000
2014
2012
2014
2004
1996
2001
1998
2001
2013
2014
2017
2020
1999
2013
1999
2014
2014
2019
2019
2005
2007
2007
2007
2007
2014
2007
1998
2014
2015
1994
2012
2004
2004
1996
1996
2002/2020
1996
1996
2005
2011
2013
1996
1997
1997
1998
2014
2020
2017
2017
2005
2004
2005
2006
2010
2012
2014
2019
2020
1,413
1,964
978
648
1,074
2,178
1,253
642
795
1,032
1,296
1,701
646
593
872
2,104
1,753
678
2,464
1,264
993
3,664
4,432
3,501
2,248
1,754
1,408
1,770
2,187
1,166
1,356
1,287
1,196
2,189
2,366
1,086
1,597
2,173
4,123
1,758
2,905
2,453
2,060
1,242
2,198
1,346
—
2,964
985
1,840
1,117
1,238
394
366
1,698
2,372
2,538
2,995
2,904
777
2,851
5,963
1,693
930
922
609
939
1,072
1,995
1,569
1,287
1,631
2,002
4,485
3,100
1,475
1,778
3,006
2,387
1,750
1,290
—
1,011
900
1,256
1,168
1,521
3,130
1,064
1,234
674
287
—
Initial Cost
Buildings
&
Costs
Subsequent
to
Gross Carrying Amount at
December 31, 2020
Buildings
&
Accumulated
Depreciation
(A)
Description
Oviedo, FL
Palm Coast I, FL
Palm Coast II, FL
Palm Harbor, FL
Pembroke Pines, FL
Royal Palm Beach II, FL
Sanford I, FL
Sanford II, FL
Sarasota, FL
St. Augustine, FL
St. Petersburg, FL
Stuart, FL
SW Ranches, FL
Tampa I, FL
Tampa II, FL
Tampa III, FL
West Palm Beach I, FL
West Palm Beach II, FL
West Palm Beach III, FL
West Palm Beach IV, FL
Winter Park I, FL
Winter Park II, FL
Winter Springs, FL
Alpharetta, GA
Atlanta I, GA
Atlanta II, GA
Austell, GA
Decatur, GA
Duluth, GA
Lawrenceville, GA
Lithia Springs, GA
Norcross I, GA
Norcross II, GA
Norcross III, GA
Norcross IV, GA
Norcross V, GA
Peachtree City I, GA
Peachtree City II, GA
Smyrna, GA
Snellville, GA
Suwanee I, GA
Suwanee II, GA
Villa Rica, GA
Addison, IL
Aurora, IL
Bartlett, IL
Bellwood, IL
Blue Island, IL
Bolingbrook, IL
Chicago I, IL
Chicago II, IL
Chicago III, IL
Chicago IV, IL
Chicago V, IL
Chicago VI, IL
Chicago VII, IL
Countryside, IL
Des Plaines, IL
Downers Grove, IL
Elk Grove Village, IL
Evanston, IL
Glenview I, IL
Glenview II, IL
Gurnee, IL
Hanover, IL
Harvey, IL
Joliet, IL
Kildeer, IL
Lombard, IL
Maywood, IL
Mount Prospect, IL
Mundelein, IL
North Chicago, IL
Plainfield I, IL
Plainfield II, IL
Riverwoods, IL
Schaumburg, IL
Streamwood, IL
Warrenville, IL
Waukegan, IL
West Chicago, IL
Westmont, IL
Wheeling I, IL
Wheeling II, IL
Woodridge, IL
Schererville, IN
Boston I, MA
Boston II, MA
Boston III, MA
Brockton I, MA
Brockton II, MA
East Bridgewater, MA
Fall River, MA
Square
Footage
49,236
47,400
128,690
82,685
67,321
81,178
61,810
69,875
71,142
59,720
66,025
87,456
65,042
83,938
74,790
40,125
66,831
94,113
77,410
102,722
54,416
95,938
61,965
90,501
66,600
81,565
83,655
145,320
70,885
73,890
73,200
85,320
52,595
46,955
57,475
50,030
49,875
59,950
57,015
80,050
85,125
79,590
65,281
31,575
73,985
51,395
86,500
55,125
83,315
95,942
79,815
84,825
60,420
51,775
71,748
89,904
97,648
69,450
71,625
64,104
57,740
100,085
30,844
80,300
41,190
60,090
72,865
74,438
58,728
60,225
65,000
44,700
53,500
53,900
52,100
73,883
31,160
64,305
48,326
79,500
48,175
53,400
54,210
67,825
50,252
67,600
33,286
59,920
108,205
59,993
69,375
35,905
75,900
Improvements Acquisition
667
136
455
420
3,019
349
245
255
1,527
3,564
467
3,317
309
311
290
—
1,905
606
148
362
192
176
163
1,117
145
10
476
586
652
552
469
1,108
256
109
149
60
826
184
375
437
385
165
185
626
308
445
1,197
147
219
1,079
109
862
160
147
80
354
643
893
347
332
537
626
107
455
413
616
329
4,607
1,078
84
679
551
880
377
349
97
342
629
567
690
597
345
584
655
422
85
295
952
835
1,270
26
15
102
2,824
2,735
7,450
16,178
3,772
8,607
2,911
4,944
3,656
1,515
10,173
3,625
7,598
6,249
10,262
7,997
3,420
8,671
3,962
7,392
4,268
9,286
7,259
4,720
4,053
11,579
4,711
6,776
2,044
2,903
5,552
2,930
2,025
4,625
2,839
3,083
2,532
1,963
4,271
4,781
5,010
6,942
5,616
3,531
3,652
2,493
5,768
3,120
8,254
13,118
4,035
11,962
6,385
5,144
9,535
11,191
12,684
4,327
13,153
3,535
5,440
10,367
3,144
5,440
2,197
3,635
4,704
2,187
3,938
3,689
3,114
2,782
3,006
1,715
2,000
7,826
645
1,662
3,072
4,363
2,249
3,873
3,213
3,816
3,397
5,589
3,048
8,628
15,829
4,394
3,520
4,748
11,684
Land
440
555
1,511
2,387
953
1,640
453
1,003
529
383
2,721
685
1,390
2,670
2,291
988
835
2,129
804
1,499
866
1,897
1,248
917
822
1,890
1,643
616
373
546
719
632
366
938
576
881
529
398
750
1,660
1,737
622
757
428
644
931
1,012
633
1,675
2,667
833
2,427
1,296
1,044
1,596
—
2,607
1,564
1,498
1,446
1,103
3,740
725
1,521
1,126
869
547
1,997
1,305
749
1,701
1,498
1,073
1,740
694
1,585
538
1,447
1,066
1,198
1,071
1,155
857
793
943
1,134
538
1,516
3,211
577
1,900
1,039
1,794
Encumbrances Land
440
555
1,511
2,457
337
1,640
453
1,003
333
135
2,721
324
1,390
2,670
2,291
989
719
2,129
804
1,499
866
1,897
1,248
806
822
1,890
1,635
616
373
546
748
514
366
938
576
881
435
398
750
1,660
1,737
800
757
428
644
931
1,012
633
1,675
2,667
833
2,427
1,296
1,044
1,596
—
2,607
1,564
1,498
1,446
1,103
3,740
725
1,521
1,126
869
547
2,102
1,305
749
1,701
1,498
1,073
1,770
694
1,585
538
1,447
1,066
1,198
1,071
1,155
857
793
943
1,134
538
1,516
3,211
577
1,900
1,039
1,794
F-47
Improvements Total
2,814
2,871
7,906
16,668
5,615
7,294
2,588
5,198
3,964
4,469
10,640
5,943
6,043
5,207
10,552
7,998
4,069
7,121
4,106
7,753
4,459
9,462
7,422
4,126
4,182
11,589
4,531
6,347
2,370
3,024
6,049
3,104
1,989
4,733
2,979
3,143
2,572
2,144
3,520
4,554
4,677
5,888
5,801
3,326
3,101
2,303
5,219
3,267
8,473
14,197
4,145
12,823
6,545
5,290
9,615
11,545
13,328
4,179
13,500
2,926
5,976
8,560
3,251
4,548
2,038
3,348
3,937
6,374
3,891
3,773
3,047
2,658
3,107
1,638
1,832
7,923
783
1,822
2,922
3,988
2,242
3,319
2,977
3,476
3,027
5,674
2,912
7,118
16,664
5,664
3,546
4,763
11,786
3,254
3,426
9,417
19,055
6,568
8,934
3,041
6,201
4,493
4,852
13,361
6,628
7,433
7,877
12,843
8,986
4,904
9,250
4,910
9,252
5,325
11,359
8,670
5,043
5,004
13,479
6,174
6,963
2,743
3,570
6,768
3,736
2,355
5,671
3,555
4,024
3,101
2,542
4,270
6,214
6,414
6,510
6,558
3,754
3,745
3,234
6,231
3,900
10,148
16,864
4,978
15,250
7,841
6,334
11,211
11,545
15,935
5,743
14,998
4,372
7,079
12,300
3,976
6,069
3,164
4,217
4,484
8,371
5,196
4,522
4,748
4,156
4,180
3,378
2,526
9,508
1,321
3,269
3,988
5,186
3,313
4,474
3,834
4,269
3,970
6,808
3,450
8,634
19,875
6,241
5,446
5,802
13,580
Year
Acquired/
Developed
2006
2014
2014
2016
1997
2007
2006
2014
1999
1996
2016
1997
2007
2007
2016
2020
2001
2004
2012
2014
2014
2019
2019
2001
2012
2019
2006
1998
2011
2011
2015
2001
2011
2012
2012
2019
2001
2012
2001
2007
2007
2007
2015
2004
2004
2004
2001
2015
2014
2014
2014
2014
2015
2015
2016
2017
2014
2004
2016
2004
2013
2004
2018
2004
2004
2004
2004
2004
2004
2015
2004
2004
2004
2004
2005
2017
2004
2004
2005
2004
2004
2004
2004
2004
2004
2014
2010
2002
2014
2015
2019
2019
2019
1,251
659
1,797
2,143
3,111
3,074
1,092
1,054
2,102
2,532
1,418
3,364
2,532
2,178
1,363
—
1,954
3,014
1,054
1,663
888
298
231
1,956
1,103
492
1,943
3,699
607
912
970
1,448
617
1,335
795
152
1,233
575
1,700
1,923
1,971
2,457
961
1,388
1,280
943
2,469
602
1,695
2,923
820
2,647
1,203
967
1,361
1,103
2,583
1,761
1,909
1,235
1,430
3,582
223
1,878
850
1,318
1,649
1,465
1,602
691
1,299
1,074
1,203
679
713
1,021
309
759
1,153
1,686
916
1,384
1,227
1,440
1,235
1,193
947
3,214
3,346
940
179
207
506
Initial Cost
Buildings
&
Costs
Subsequent
to
Gross Carrying Amount at
December 31, 2020
Buildings
&
Accumulated
Depreciation
(A)
Description
Franklin, MA
Haverhill, MA
Holbrook, MA
Lawrence, MA
Leominster, MA
Medford, MA
Milford, MA
New Bedford, MA
Stoneham, MA
Tewksbury, MA
Walpole, MA
Waltham, MA
Annapolis I, MD
Annapolis II, MD
Baltimore, MD
Beltsville, MD
California, MD
Capitol Heights, MD
Clinton, MD
District Heights, MD
Elkridge, MD
Gaithersburg I, MD
Gaithersburg II, MD
Hyattsville, MD
Jessup, MD
Laurel, MD
Temple Hills I, MD
Temple Hills II, MD
Timonium, MD
Upper Marlboro, MD
Bloomington, MN
Belmont, NC
Burlington I, NC
Burlington II, NC
Cary, NC
Charlotte I, NC
Charlotte II, NC
Charlotte III, NC
Charlotte IV, NC
Cornelius, NC
Pineville, NC
Raleigh, NC
Bayonne, NJ
Bordentown, NJ
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 I, NJ
Hoboken II, NJ
Linden, NJ
Lumberton, NJ
Morris Township, NJ
Parsippany, NJ
Rahway, NJ
Randolph, NJ
Ridgefield, NJ
Roseland, NJ
Sewell, NJ
Somerset, NJ
Whippany, NJ
Albuquerque I, NM
Albuquerque II, NM
Albuquerque III, NM
Henderson, NV
Las Vegas I, NV
Las Vegas II, NV
Las Vegas III, NV
Las Vegas IV, NV
Las Vegas V, NV
Las Vegas VI, NV
Las Vegas VII, NV
Las Vegas VIII, NV
Baldwin, NY
Brightwaters, NY
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
Square
Footage
63,405
60,589
56,100
34,672
54,048
58,705
44,950
69,775
62,200
62,402
75,040
87,840
92,302
78,331
96,550
63,657
77,840
79,600
84,225
80,365
63,475
87,045
74,050
52,830
83,908
162,896
97,270
84,325
66,717
62,240
101,028
81,850
109,170
42,165
111,650
69,000
53,683
69,037
37,700
59,546
77,747
48,675
96,938
50,550
54,910
51,700
65,450
105,550
90,656
107,704
36,025
70,400
38,684
27,896
81,470
70,550
38,584
85,178
100,425
96,025
77,226
84,705
83,121
52,565
67,803
53,569
59,226
57,335
92,070
65,927
58,798
57,536
75,150
48,732
71,425
84,400
90,527
107,226
92,732
94,525
59,565
61,355
22,502
67,864
99,028
105,835
77,015
54,704
45,970
78,700
30,550
147,810
159,805
Improvements Acquisition
18
244
77
286
2,701
359
7
47
324
289
583
4
132
55
1,753
183
389
72
172
670
255
642
98
159
66
4456
2759
100
274
163
374
1,086
959
600
1,003
1,788
78
98
6
1,133
212
483
11
204
1,769
254
351
821
3,004
4,790
200
482
761
840
415
574
1,002
34
2,837
332
3,529
6,293
752
1,653
460
462
1,480
624
680
474
447
443
144
614
2,955
140
398
198
182
216
1
692
2
1,443
11,802
286
179
279
400
246
406
1,647
637
5,704
6,610
8,033
4,737
1,519
7,165
6,638
9,950
7,679
7,579
13,069
14,491
13,938
17,890
5,997
6,295
4,280
13,332
10,757
8,313
5,695
9,000
11,750
5,485
13,541
8,035
8,788
10,988
11,184
6,455
12,298
2,196
2,837
1,829
3,097
4,429
8,764
8,211
1,425
4,991
9,169
2,398
23,007
2,255
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
26,529
6,008
4,864
5,602
5,322
7,326
4,872
8,925
9,759
2,766
6,129
10,615
3,395
3,801
2,171
6,143
2,986
5,411
10,034
8,575
9,560
12,299
11,483
13,334
7,685
4,029
11,411
28,289
36,180
22,074
17,556
16,803
22,512
6,137
39,279
44,816
Land
2,034
669
1,688
585
338
1,330
1,222
1,653
1,558
1,537
634
2,683
2,643
2,425
1,173
1,268
1,486
2,704
2,182
1,527
1,120
3,124
2,383
1,113
2,399
1,928
1,800
2,229
2,269
1,309
1,598
451
498
340
543
1,068
821
1,974
721
2,424
2,490
296
—
457
485
222
471
4,340
779
1,315
104
284
751
246
1,086
1,893
1,370
19,867
1,043
987
1,072
844
1,486
1,108
1,810
1,844
706
1,243
2,153
1,039
1,163
664
1,246
1,851
3,355
1,171
1,116
1,460
1,386
1,575
2,186
1,559
2,216
2,014
10,019
6,460
—
—
—
—
1,251
7,967
9,090
Encumbrances Land
2,034
669
1,688
585
90
1,330
1,222
1,653
1,558
1,537
634
2,683
2,643
2,425
1,050
1,277
1,486
2,704
2,182
1,527
1,155
3,124
2,383
1,113
2,399
1,409
1,541
2,229
2,269
1,309
1,598
385
498
320
543
782
821
1,974
721
2,424
2,490
209
457
234
222
471
4,346
290
504
104
284
751
246
1,086
1,885
1,370
19,854
517
987
500
475
1,486
855
1,810
1,844
484
1,243
2,153
1,039
1,163
664
1,246
1,851
3,354
1,171
1,116
1,460
1,386
1,575
2,186
1,559
2,216
2,014
—
6,459
—
—
—
—
1,245
7,967
9,090
F-48
5,283
21,030
23,148
Improvements Total
5,722
6,854
8,110
5,023
3,572
6,032
6,645
9,997
8,003
7,867
13,652
14,495
14,070
17,945
5,576
6,471
3,659
13,405
10,925
7,802
5,986
7,533
11,848
5,621
13,607
9,516
8,990
11,089
11,458
6,598
12,672
2,461
2,978
1,882
3,394
4,761
8,842
8,309
1,431
6,124
9,380
2,402
23,018
2,445
3,681
1,291
2,637
10,494
5,301
8,568
700
1,865
2,360
2,978
5,731
5,231
3,808
26,550
7,294
5,152
7,468
10,258
8,079
4,835
9,385
10,221
3,168
6,751
11,295
2,743
3,020
1,860
6,286
3,183
7,783
10,174
8,973
9,758
12,481
11,699
13,335
8,376
4,031
11,260
29,537
32,119
19,597
15,724
15,171
22,866
6,572
40,921
45,422
7,756
7,523
9,798
5,608
3,910
7,362
7,867
11,650
9,561
9,404
14,286
17,178
16,713
20,370
6,749
7,739
5,145
16,109
13,107
9,329
7,106
10,657
14,231
6,734
16,006
11,444
10,790
13,318
13,727
7,907
14,270
2,912
3,476
2,222
3,937
5,829
9,663
10,283
2,152
8,548
11,870
2,698
23,018
2,902
4,166
1,513
3,108
14,834
6,080
9,883
804
2,149
3,111
3,224
6,817
7,124
5,178
46,417
8,337
6,139
8,540
11,102
9,565
5,943
11,195
12,065
3,874
7,994
13,448
3,782
4,183
2,524
7,532
5,034
11,138
11,345
10,089
11,218
13,867
13,274
15,521
9,935
6,247
13,274
39,556
38,579
19,597
15,724
15,171
22,866
7,823
48,888
54,512
Year
Acquired/
Developed
2019
2015
2019
2015
1998
2007
2019
2019
2013
2014
2016
2019
2017
2019
2001
2013
2004
2015
2013
2011
2013
2005
2015
2013
2020
2001
2001
2014
2014
2013
2016
2001
2001
2001
2001
2002
2016
2018
2019
2015
2015
1998
2019
2012
1996
2010
2012
2005
1996
1996
2010
2010
2005
1997
2012
2006
2005
2020
1996
2012
1997
1997
2013
2002
2015
2015
2001
2012
2013
2005
2005
2005
2014
2006
2006
2016
2016
2016
2016
2018
2020
2015
2020
2010
2011
2011
2011
2011
2011
2012
2012
2012
2012
271
1,113
374
843
1,893
2,379
296
425
1,952
1,686
1,763
746
1,504
942
2,591
1,551
1,507
2,311
2,473
2,306
1,395
3,109
2,057
1,348
273
4,348
4,294
2,442
2,542
1,596
1,526
1,176
1,542
883
1,698
2,130
1,018
596
80
1,008
1,538
1,329
1,564
639
2,062
402
675
4,050
2,911
4,764
200
601
975
1,602
1,478
2,232
1,575
499
4,063
1,364
3,964
4,100
1,968
2,217
1,639
1,667
1,557
1,755
2,714
1,081
1,194
759
1,250
1,743
2,981
1,248
1,180
1,164
1,382
759
31
1,499
11
3,697
8,650
9,342
5,716
4,595
4,441
6,426
1,830
11,413
12,196
Description
Bronx XI, NY
Bronx XII, NY
Bronx XIII, NY
Bronx XIV, NY
Brooklyn I, NY
Brooklyn II, NY
Brooklyn III, NY
Brooklyn IV, NY
Brooklyn V, NY
Brooklyn VI, NY
Brooklyn VII, NY
Brooklyn VIII, NY
Brooklyn IX, NY
Brooklyn X, NY
Brooklyn XI, NY
Brooklyn XII, NY
Brooklyn XIII, NY
Brooklyn XIV, NY
Brooklyn XV, NY
College Point, NY
Flushing I, NY
Flushing II, NY
Holbrook, NY
Jamaica I, NY
Jamaica II, NY
Long Island City I, NY
Long Island City II, NY
Long Island City III, NY
Long Island City IV, NY
New Rochelle I, NY
New Rochelle II, NY
New York, NY
North Babylon, NY
Queens I, NY
Queens II, NY
Queens III, NY
Riverhead, NY
Southold, NY
Staten Island, NY
Tuckahoe, NY
West Hempstead, NY
White Plains, NY
Woodhaven, NY
Wyckoff, NY
Yorktown, NY
Cleveland I, OH
Cleveland II, OH
Columbus I, OH
Columbus II, OH
Columbus III, OH
Columbus IV, OH
Columbus V, OH
Columbus VI, OH
Grove City, OH
Hilliard, OH
Lakewood, OH
Lewis Center, 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
Malvern, PA
Montgomeryville, PA
Norristown, PA
Philadelphia I, PA
Philadelphia II, PA
Exeter, RI
Johnston, RI
Wakefield, RI
Charleston I, SC
Charleston II, SC
Goose Creek I, SC
Goose Creek II, SC
Mount Pleasant, SC
North Charleston I, SC
North Charleston II, SC
North Charleston III, SC
Woonsocket, RI
Antioch, TN
Nashville I, TN
Nashville II, TN
Nashville III, TN
Nashville IV, TN
Nashville V, TN
Nashville VI, TN
Square
Footage
46,425
100,945
199,459
110,630
64,631
60,845
41,610
37,560
47,070
74,180
72,725
61,525
46,950
55,913
110,025
131,813
89,580
77,496
70,025
131,382
64,995
168,069
60,372
91,483
92,780
88,800
66,069
81,430
67,855
44,076
63,385
95,050
78,350
82,875
90,548
87,168
38,690
59,945
96,573
51,248
83,395
85,894
50,435
60,440
78,909
46,000
58,325
71,905
36,809
51,200
61,150
73,325
63,525
89,290
89,290
39,332
76,224
93,200
48,672
47,850
80,297
67,245
43,683
90,281
62,700
81,285
57,750
64,838
77,815
18,820
84,145
74,560
96,864
68,279
41,275
77,275
47,895
58,840
40,950
52,475
41,419
72,671
54,955
56,895
54,184
79,100
75,985
108,490
83,174
101,525
102,450
74,560
72,416
Encumbrances Land
Accumulated
Depreciation
(A)
15,713
54,300
19,094
19,106
12,852
29,981
Initial Cost
Buildings
&
Costs
Subsequent
to
Gross Carrying Amount at
December 31, 2020
Buildings
&
—
—
19,622
—
1,795
1,601
2,772
2,283
2,374
4,210
5,604
4,982
2,966
3,739
10,093
7,249
16,159
—
31,031
39,273
17,177
54,458
2,029
2,043
5,391
5,700
23,927
—
21,389
1,673
3,167
42,022
225
5,158
6,208
13,663
1,068
2,079
1,919
2,363
2,237
3,295
2,015
1,961
2,382
525
290
1,234
769
326
443
838
701
1,756
1,361
405
1,056
63
63
290
515
1,290
570
525
509
1,726
541
1,019
926
2,959
975
662
1,461
1,012
547
1,061
823
606
570
771
409
1,434
755
809
763
1,049
588
405
593
416
992
895
2,749
Improvements Acquisition
391
114
1,193
1
475
578
208
282
164
180
473
273
314
3,154
256
43
2
20
21
21
123
21
97
3,092
462
284
21
20
21
1,242
481
414
4,271
1,212
532
270
240
363
960
374
283
1,303
314
453
245
400
274
191
433
142
165
168
280
386
376
711
163
2,481
1,665
1,318
3,333
452
460
3,325
358
377
263
619
1,407
1,976
486
2,478
3,028
333
380
166
219
181
95
77
139
57
38
41
94
563
464
1,237
379
611
574
926
276
17,130
31,603
68,378
49,649
10,172
9,073
13,570
11,184
11,636
20,638
27,452
24,561
14,620
7,703
35,385
40,230
27,974
22,671
28,476
49,781
17,356
98,876
10,737
11,658
26,413
28,101
30,005
42,044
26,622
4,827
2,713
38,753
2,514
12,339
25,815
32,025
1,149
2,238
9,463
17,411
11,030
18,049
11,219
11,113
11,720
2,592
1,427
3,151
3,788
1,607
2,182
4,128
3,454
4,485
3,476
854
5,206
704
704
1,129
2,323
3,295
3,486
766
2,508
8,508
2,668
5,023
5,296
18,198
4,809
3,142
8,334
4,990
2,697
5,229
4,058
1,763
1,986
5,307
2,641
9,826
5,349
2,129
2,038
5,172
4,906
3,379
4,950
3,469
8,274
4,311
7,702
Land
—
—
19,684
—
1,795
1,601
2,772
2,284
2,374
4,211
5,604
4,982
2,966
4,885
10,093
7,250
16,159
—
31,031
39,273
17,177
54,458
2,029
2,043
5,391
5,700
23,928
—
21,389
1,673
3,762
42,022
568
5,160
6,208
13,663
1,068
2,079
1,919
2,363
2,237
3,295
2,015
1,961
2,382
524
289
1,239
769
326
443
838
701
1,761
1,366
405
1,056
332
214
469
898
1,295
570
935
508
1,726
519
1,019
926
2,959
975
638
1,461
1,012
547
1,061
823
606
570
771
409
1,434
755
809
763
1,049
588
405
593
416
992
895
2,749
Improvements Total
17,523
31,717
69,509
49,650
9,226
8,331
13,860
11,529
11,853
20,925
28,090
24,834
14,935
9,710
35,641
40,272
27,976
22,691
28,497
49,802
17,479
98,897
10,834
12,015
27,018
28,385
30,025
42,064
26,643
4,958
18,953
39,167
5,632
13,549
26,347
32,295
876
1,753
10,423
12,014
11,276
16,854
10,235
10,081
11,979
2,249
1,227
2,867
4,221
1,750
2,346
4,296
3,734
4,250
3,364
474
5,369
2,510
1,861
1,019
4,036
3,286
3,111
3,468
2,081
8,832
2,919
5,641
4,983
20,115
5,233
5,750
8,011
5,323
3,077
5,395
4,278
1,944
2,081
5,384
2,780
9,883
5,387
2,170
2,132
5,734
3,935
3,569
3,962
3,744
7,603
5,238
7,978
17,523
31,717
89,193
49,650
11,021
9,932
16,632
13,813
14,227
25,136
33,694
29,816
17,901
14,595
45,734
47,522
44,135
22,691
59,528
89,075
34,656
153,355
12,863
14,058
32,409
34,085
53,953
42,064
48,032
6,631
22,715
81,189
6,200
18,709
32,555
45,958
1,944
3,832
12,342
14,377
13,513
20,149
12,250
12,042
14,361
2,773
1,516
4,106
4,990
2,076
2,789
5,134
4,435
6,011
4,730
879
6,425
2,842
2,075
1,488
4,934
4,581
3,681
4,403
2,589
10,558
3,438
6,660
5,909
23,074
6,208
6,388
9,472
6,335
3,624
6,456
5,101
2,550
2,651
6,155
3,189
11,317
6,142
2,979
2,895
6,783
4,523
3,974
4,555
4,160
8,595
6,133
10,727
2,261
F-49
Year
Acquired/
Developed
2014
2016
2018
2020
2010
2010
2011
2011
2011
2011
2011
2014
2014
2015
2016
2017
2020
2020
2020
2020
2018
2020
2015
2001
2011
2014
2020
2020
2020
2005
2012
2017
1998
2015
2016
2019
2005
2005
2013
2011
2012
2011
2011
2010
2011
2005
2005
2006
2014
2014
2014
2014
2014
2006
2006
1989
2014
1980
1979
1988
1998
2006
2007
1980
2005
2012
2012
2012
2001
2013
2012
2011
2001
2014
2014
2014
2014
2019
2019
2019
2019
2019
2019
2019
2019
2014
2005
2005
2005
2006
2006
2015
2015
3,181
4,716
6,184
—
3,004
2,750
4,045
3,364
3,446
6,081
8,151
5,257
3,158
1,695
5,212
4,149
622
—
—
—
1,018
—
1,763
5,543
7,884
5,465
—
—
—
2,026
5,311
3,796
3,102
2,419
4,478
2,347
366
738
2,520
3,496
2,959
5,142
2,943
3,208
3,504
876
492
1,396
845
363
476
857
726
1,996
1,592
209
1,076
1,337
1,010
775
2,047
1,564
1,346
1,845
828
2,301
746
1,479
2,402
3,855
1,350
1,374
3,574
1,174
597
1,067
828
100
98
233
111
435
233
109
107
1,103
1,534
1,359
1,556
1,743
3,617
1,149
1,304
Initial Cost
Buildings
&
Costs
Subsequent
to
Gross Carrying Amount at
December 31, 2020
Buildings
Description
Nashville VII, TN
Nashville VIII, TN
Allen, TX
Austin I, TX
Austin II, TX
Austin III, TX
Austin IV, TX
Austin V, TX
Austin VI, TX
Austin VII, TX
Austin VIII, TX
Austin IX, TX
Austin X, TX
Carrollton, TX
Cedar Park, TX
College Station, TX
Cypress, TX
Dallas I, TX
Dallas II, TX
Dallas III, TX
Dallas IV, TX
Dallas V, TX
Denton, TX
Fort Worth I, TX
Fort Worth II, TX
Fort Worth III, TX
Fort Worth IV, TX
Fort Worth V, TX
Frisco I, TX
Frisco II, TX
Frisco III, TX
Frisco IV, TX
Frisco V, TX
Frisco VI, TX
Garland I, TX
Garland II, TX
Grapevine, TX
Houston III, TX
Houston IV, TX
Houston V, TX
Houston VI, TX
Houston VII, TX
Houston VIII, TX
Houston IX, TX
Houston X, TX
Houston XI, TX
Humble, TX
Katy, TX
Keller, TX
Lewisville I, TX
Lewisville II, TX
Lewisville III, TX
Little Elm I, TX
Little Elm II, TX
Mansfield I, TX
Mansfield II, TX
Mansfield III, TX
McKinney I, TX
McKinney II, TX
McKinney III, TX
North Richland Hills, TX
Pearland, TX
Richmond, TX
Roanoke, TX
San Antonio I, TX
San Antonio II, TX
San Antonio III, TX
San Antonio IV, TX
San Antonio V, TX
Spring, TX
Westworth Village, TX
Murray I, UT
Murray II, UT
Salt Lake City I, UT
Salt Lake City II, UT
Alexandria, VA
Arlington, VA
Burke Lake, VA
Dumfries, VA
Fairfax, VA
Fredericksburg I, VA
Fredericksburg II, VA
Leesburg, VA
Manassas, VA
McLearen, VA
Vienna, VA
Divisional Offices
Square
Footage
65,681
71,234
62,330
59,645
64,310
70,585
65,258
67,850
63,150
71,023
61,038
78,505
85,225
77,430
86,725
26,550
58,201
58,582
76,673
82,920
116,513
54,400
64,446
50,066
72,900
82,395
77,329
78,675
52,894
71,011
76,281
74,875
74,165
69,176
70,100
68,425
77,094
61,590
43,750
121,189
54,690
46,981
54,078
51,208
95,529
80,930
70,700
71,118
89,035
67,265
128,241
93,855
60,165
96,236
71,832
57,375
71,000
46,770
70,050
53,650
57,200
72,050
102,275
59,240
73,315
73,005
71,555
61,500
74,645
78,686
79,955
60,280
70,796
56,446
51,676
114,100
95,993
91,267
79,815
73,265
69,475
61,057
85,503
72,745
68,960
55,260
Encumbrances
Land
1,116
1,363
714
2,239
734
1,030
862
1,050
1,150
1,429
2,935
1,321
1,365
661
3,350
812
360
2,475
940
2,608
2,369
—
553
1,253
868
1,000
1,274
1,271
1,093
1,564
1,147
719
1,159
1,064
751
862
1,211
575
960
1,153
575
681
1,294
296
5,267
5,616
706
1,329
1,330
476
1,464
1,307
892
1,219
837
662
947
1,632
855
652
2,252
450
1,437
1,337
2,895
1,047
996
829
1,066
580
1,085
3,847
2,147
2,695
2,074
2,812
6,836
2,093
1,810
2,276
1,680
1,757
1,746
860
1,482
2,300
38,543,757
1,062,283
8,592
8,820
3,519
2,038
3,894
5,468
4,250
5,175
5,669
6,263
7,007
9,643
8,310
3,261
7,950
740
1,773
2,253
4,635
12,857
11,850
11,604
2,936
1,141
4,607
4,928
7,693
5,485
3,148
4,507
6,088
4,072
5,714
5,247
3,984
4,578
8,559
524
875
6,122
524
3,355
6,377
1,459
12,667
15,330
5,727
6,552
7,960
2,525
7,217
15,025
5,529
9,864
4,443
3,261
4,703
1,486
5,076
3,213
2,049
2,216
7,083
1,217
2,635
5,558
5,286
3,891
7,411
3,081
7,643
1,017
567
712
548
13,865
9,843
10,940
13,774
11,220
4,840
5,062
9,894
4,872
8,400
11,340
Improvements Acquisition
20
21
149
344
580
377
536
363
353
380
102
63
2
174
443
252
217
533
263
661
219
111
711
382
457
350
46
88
267
292
777
427
184
182
780
358
149
545
775
2,055
5,867
199
507
215
28
122
144
103
358
552
563
286
146
168
618
176
253
382
414
92
282
635
270
298
591
573
573
182
52
586
8
614
742
626
484
283
102
1,266
—
348
479
507
218
380
271
287
865
379,964
4,041,739
Land
1,116
1,363
714
2,239
738
1,035
862
1,050
1,150
1,429
2,935
1,321
1,366
661
3,350
813
360
2,475
940
2,608
2,369
—
569
1,253
874
1,000
1,274
1,271
1,093
1,564
1,154
719
1,159
1,064
767
862
1,211
576
961
991
983
681
1,294
296
5,267
5,616
706
1,329
1,331
492
1,464
1,307
892
1,219
843
662
947
1,634
857
652
2,252
450
1,437
1,337
2,895
1,052
996
829
1,066
580
1,085
3,847
2,147
2,696
1,937
2,812
6,836
2,093
1,810
2,276
1,680
1,758
1,746
860
1,482
2,300
1,093,503
&
Improvements
8,612
8,841
3,656
1,787
3,910
5,139
4,786
5,539
6,023
6,642
7,109
9,706
8,311
3,423
8,393
709
1,968
2,034
4,899
13,518
12,068
11,717
3,151
1,146
4,393
5,279
7,739
5,573
2,666
3,765
6,053
3,903
5,897
5,429
4,169
4,338
8,708
884
1,342
7,427
5,067
3,554
6,860
1,657
12,695
15,452
5,871
6,656
7,703
2,638
7,780
15,311
5,675
10,032
4,477
3,425
4,956
1,446
4,853
3,304
1,704
2,838
7,354
1,142
2,375
5,438
5,136
4,073
7,463
3,175
7,651
1,246
1,048
1,037
774
14,060
9,946
10,606
13,774
11,538
4,198
4,410
8,821
4,566
7,515
11,574
865
4,122,995
(A)
Accumulated Year
Depreciation Acquired/
Developed
2019
2019
2012
2005
2006
2006
2014
2014
2014
2015
2016
2018
2020
2012
2016
2005
2012
2005
2013
2014
2015
2015
2006
2005
2006
2015
2016
2019
2005
2005
2006
2010
2014
2014
2006
2006
2016
2005
2005
2006
2011
2012
2012
2012
2018
2018
2015
2013
2006/2017
2006
2013
2016
2016
2016
2006
2012
2016
2005
2006
2014
2005
2012
2013
2005
2005
2006
2007
2016
2020
2006
2020
2005
2005
2005
2005
2012
2015
2011
2020
2012
2005
2005
2011
2010
2010
2012
378
391
988
701
1,703
2,255
1,056
1,137
1,220
1,085
1,205
985
44
879
1,372
263
531
816
1,149
2,590
2,230
2,045
1,233
459
1,973
978
1,190
191
1,062
1,500
2,659
1,249
1,296
1,103
1,831
1,869
1,330
372
535
3,006
1,549
1,024
1,837
449
987
954
965
1,505
2,329
1,147
1,849
2,084
811
1,411
1,899
945
647
539
2,141
640
671
729
1,656
424
869
2,241
2,107
513
192
1,330
21
555
433
476
354
3,773
32
3,340
—
3,056
1,583
1,699
2,560
1,460
2,395
3,022
234
930,371
Total
9,728
10,204
4,370
4,026
4,648
6,174
5,648
6,589
7,173
8,071
10,044
11,027
9,677
4,084
11,743
1,522
2,328
4,509
5,839
16,126
14,437
11,717
3,720
2,399
5,267
6,279
9,013
6,844
3,759
5,329
7,207
4,622
7,056
6,493
4,936
5,200
9,919
1,460
2,303
8,418
6,050
4,235
8,154
1,953
17,962
21,068
6,577
7,985
9,034
3,130
9,244
16,618
6,567
11,251
5,320
4,087
5,903
3,080
5,710
3,956
3,956
3,288
8,791
2,479
5,270
6,490
6,132
4,902
8,529
3,755
8,736
5,093
3,195
3,733
2,711
16,872
16,782
12,699
15,584
13,814
5,878
6,168
10,567
5,426
8,997
13,874
865
5,216,498
(A) 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.
F-50
Activity in storage properties during the period from January 1, 2018 through December 31, 2020 was as follows (in thousands):
Storage properties*
Balance at beginning of year
Acquisitions & improvements
Fully depreciated assets
Dispositions and other
Construction in progress, net
Right-of-use assets - finance leases
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
Storage properties, net
2020
2019
2018
4,699,844 $
825,247
(83,418)
(8,533)
14,718
41,896
5,489,754 $
4,463,455 $
364,324
(81,717)
(3,033)
(43,185)
—
4,699,844 $
4,161,715
381,182
(26,125)
(8,735)
(44,582)
—
4,463,455
925,359 $
143,952
(83,418)
(1,953)
983,940 $
4,505,814 $
862,487 $
145,233
(81,717)
(644)
925,359 $
3,774,485 $
752,925
138,510
(26,125)
(2,823)
862,487
3,600,968
$
$
$
$
$
* These amounts include equipment that is housed at the Company’s stores which is excluded from Schedule III above.
As of December 31, 2020, the aggregate cost of Storage properties for federal income tax purposes was approximately $5,555.3 million.
F-51
Subsidiary
101 OLD WINDSOR ROAD, LLC
1053 CROMWELL AVENUE, LLC
12250 El Dorado Parkway, LLC
12902 South 301 Highway, LLC
1575 NORTH BLAIRS BRIDGE ROAD, LLC
186 Jamaica Ave TRS, LLC
186 JAMAICA AVE, LLC
191 CUBE SOUTHEAST FL, LLC
191 CUBE SOUTHEAST GA, LLC
191 CUBE SOUTHEAST SC, LLC
191 III CUBE 2 LLC
191 III CUBE BORDEAUX SUB, LLC
191 III CUBE CHATTANOOGA SUB, LLC
191 III CUBE GA SUB LLC
191 III CUBE GOODLETTSVILLE I SUB, G.P.
191 III CUBE GOODLETTSVILLE II SUB, G.P.
191 III CUBE GRANDVILLE SUB, LLC
191 III CUBE KNOXVILLE I SUB, G.P.
191 III CUBE KNOXVILLE II SUB, G.P.
191 III CUBE KNOXVILLE III SUB, G.P.
191 III Cube LLC
191 III CUBE MA SUB LLC
191 III CUBE MURFREESBORO SUB, LLC
191 III CUBE NC SUB LLC
191 III CUBE NEW BEDFORD SUB, LLC
191 III CUBE OLD HICKORY SUB, LLC
191 III CUBE SC SUB LLC
191 III CUBE SUB HOLDINGS 1 LLC
191 III CUBE SUB HOLDINGS 2 LLC
191 III CUBE SUB HOLDINGS 3 LLC
191 III CUBE SUB HOLDINGS 4 LLC
191 III CUBE SUB HOLDINGS 5 LLC
191 III CUBE SUB HOLDINGS 6 LLC
191 III CUBE SUB HOLDINGS 7 LLC
191 III CUBE SUB HOLDINGS 8 LLC
191 III CUBE TN SUB LLC
191 III CUBE TRINITY SUB, LLC
191 IV CUBE LLC
191 IV CUBE SOUTHEAST LLC
2225 46TH ST TRS, LLC
2225 46TH ST, LLC
2301 TILLOTSON AVE, LLC
251 JAMAICA AVE, LLC
2701 S. CONGRESS AVENUE, LLC
2880 Exterior St, LLC
2880 EXTERIOR STREET TRS, LLC
295 E. Ocotillo Road, LLC
3068 CROPSEY AVENUE, LLC
3103 N. Decatur Road, LLC
33-24 Woodside Avenue, LLC
338 3RD Avenue, LLC
38-01 47TH Avenue, LLC
38300 North Gantzel Road, LLC
39-25 21ST Street, LLC
41-06 Delong Street - Retail, LLC
41-06 Delong Street, LLC
Jurisdiction of Organization
Exhibit 21.1
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Subsidiary
4211 BELLAIRE BLVD., LLC
430 1ST AVENUE SOUTH, LLC
4370 Fountain Hills Drive NE, LLC
444 55TH STREET HOLDINGS TRS, LLC
444 55TH STREET HOLDINGS, LLC
444 55TH STREET VENTURE, LLC
444 55TH STREET, LLC
4441 Alma Road, LLC
5 Old Lancaster Associates, LLC
500 MILDRED AVENUE PRIMOS, LLC
5505 Maple Ave, LLC
5700 WASHINGTON AVENUE, LLC
5715 BURNET ROAD, LLC
610 SAWDUST ROAD, LLC
7205 Vanderbilt Way, LLC
8552 BAYMEADOWS ROAD, LLC
9641 Annapolis Road, LLC
CONSHOHOCKEN GP II, LLC
CS 1158 MCDONALD AVE, LLC
CS 160 EAST 22ND ST, LLC
CS 2087 HEMPSTEAD TPK, LLC
CS 750 W MERRICK RD, LLC
CS ANNAPOLIS HOLDINGS, LLC
CS ANNAPOLIS, LLC
CS CAPITAL INVESTORS, LLC
CS FLORIDA AVENUE, LLC
CS SDP EVERETT BORROWER, LLC
CS SDP Everett, LLC
CS SDP Newtonville, LLC
CS SDP WALTHAM BORROWER, LLC
CS SDP WALTHAM, LLC
CS SHIRLINGTON, LLC
CS SNL NEW YORK AVE, LLC
CS SNL OPERATING COMPANY, LLC
CS VALLEY FORGE VILLAGE STORAGE, LLC
CS VENTURE I, LLC
CS Vienna, LLC
CUBE HHF Limited Partnership
CUBE HHF NORTHEAST CT, LLC
CUBE HHF NORTHEAST MA, LLC
CUBE HHF NORTHEAST RI, LLC
CUBE HHF NORTHEAST SUB HOLDINGS LLC
CUBE HHF NORTHEAST TRS, LLC
CUBE HHF NORTHEAST VENTURE LLC
CUBE HHF NORTHEAST VT, LLC
CUBE HHF TRS, LLC
CUBE III TN ASSET MANAGEMENT, LLC
CUBE III TRS 2 LLC
CUBE III TRS LLC
CUBE IV SOUTHEAST TRS LLC
CUBE IV TRS LLC
CUBE VENTURE GP, LLC
CubeSmart
CUBESMART 338 3RD AVENUE, LLC
CUBESMART 39-25 21ST STREET, LLC
CubeSmart Asset Management, LLC
CUBESMART BARTOW, LLC
Jurisdiction of Organization
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Pennsylvania
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Maryland
Delaware
Delaware
Delaware
Delaware
Subsidiary
CUBESMART BOSTON ROAD, LLC
CUBESMART CLINTON, LLC
CUBESMART CYPRESS, LLC
CUBESMART EAST 135TH, LLC
CubeSmart Management, LLC
CUBESMART SOUTHERN BLVD, LLC
CUBESMART SWISS AVE, LLC
CUBESMART TEMPLE HILLS, LLC
CUBESMART TIMONIUM BORROWER, LLC
CubeSmart Timonium, LLC
CubeSmart TRS, Inc.
CubeSmart, L.P.
EAST COAST GP, LLC
EAST COAST STORAGE PARTNERS, L.P.
FREEHOLD MT, LLC
LANGHORNE GP II, LLC
Lantana Property Owner's Association, Inc.
MONTGOMERYVILLE GP II, LLC
Old Lancaster Venture, L.P.
PSI Atlantic Austin TX, LLC
PSI Atlantic Brockton MA, LLC
PSI Atlantic Cornelius NC, LLC
PSI Atlantic Haverhill MA, LLC
PSI Atlantic Holbrook NY, LLC
PSI Atlantic Humble TX, LLC
PSI Atlantic Lawrence MA, LLC
PSI Atlantic Lithia Springs GA, LLC
PSI Atlantic Nashville TN, LLC
PSI Atlantic NPB FL, LLC
PSI Atlantic Pineville NC, LLC
PSI Atlantic Surprise AZ, LLC
PSI Atlantic TRS, LLC
PSI Atlantic Villa Rica GA, LLC
PSI Atlantic Villa Rica Parcel Owner, LLC
PSI Atlantic, LLC
R STREET STORAGE ASSOCIATES, LLC
SHIRLINGTON RD II, LLC
SHIRLINGTON RD TRS, LLC
SHIRLINGTON RD, LLC
SOMERSET MT, LLC
STORAGE PARTNERS OF CONSHOHOCKEN, L.P.
Storage Partners of Freehold II, LLC
Storage Partners of Langhorne II, LP
STORAGE PARTNERS OF MONTGOMERYVILLE, L.P.
STORAGE PARTNERS OF SOMERSET, LLC
UNITED-HSRE I, L.P.
U-Store-It Development LLC
U-Store-It Trust Luxembourg S.ar.l.
Valley Forge Storage Venture, LLC
Wider Reach, LLC
YSI HART TRS, INC
YSI I LLC
Jurisdiction of Organization
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Ohio
Delaware
Delaware
Delaware
Delaware
Delaware
Florida
Delaware
Pennsylvania
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Maryland
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Luxembourg
Delaware
Delaware
Delaware
Delaware
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
The Board of Trustees
CubeSmart:
We consent to the incorporation by reference in the registration statement (No. 333-236886) on Form S-3 of CubeSmart and CubeSmart,
L.P. and (Nos. 333-211787, 333-167623, 333-143126, 333-143125, 333-143124, 333-119987 and 333-216768) on Form S-8 of
CubeSmart of our reports dated February 26, 2021, with respect to the consolidated balance sheets of CubeSmart as of December 31, 2020
and 2019, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the years in
the three-year period ended December 31, 2020, and the related notes and financial statement schedule III (collectively, the Consolidated
Financial Statements), and the effectiveness of internal control over financial reporting incorporated by reference herein and to the
reference to our firm under the heading “Experts” in the prospectus.
Our report on the Consolidated Financial Statements refers to a change in the method of accounting for leases.
/s/ KPMG LLP
Philadelphia, Pennsylvania
February 26, 2021
Exhibit 23.2
The Partners of CubeSmart, L.P. and the Board of Trustees of CubeSmart:
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the registration statement (No. 333-236886) on Form S-3 of CubeSmart and CubeSmart,
L.P. and (Nos. 333-211787, 333-167623, 333-143126, 333-143125, 333-143124, 333-119987 and 333-216768) on Form S-8 of
CubeSmart of our reports dated February 26, 2021, with respect to the consolidated balance sheets of CubeSmart, L.P. as of December 31,
2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), capital, and cash flows for each of the
years in the three-year period ended December 31, 2020, and the related notes and financial statement schedule III (collectively, the
Consolidated Financial Statements), and the effectiveness of internal control over financial reporting incorporated by reference herein and
to the reference to our firm under the heading “Experts” in the prospectus.
Our report on the Consolidated Financial Statements refers to a change in the method of accounting for leases.
/s/ KPMG LLP
Philadelphia, Pennsylvania
February 26, 2021
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Christopher P. Marr, 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 26, 2021
/s/ Christopher P. Marr
Christopher P. Marr
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.
6
Date: February 26, 2021
/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, Christopher P. Marr, 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 26, 2021
/s/ Christopher P. Marr
Christopher P. Marr
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 26, 2021
/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, 2020 (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.
6
Date: February 26, 2021
Date: February 26, 2021
/s/ Christopher P. Marr
Christopher P. Marr
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, 2020 (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.
6
Date: February 26, 2021
Date: February 26, 2021
/s/ Christopher P. Marr
Christopher P. Marr
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.
Exhibit 99.1
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes the material U.S. federal income tax considerations relating to the purchase,
ownership and disposition of common shares and preferred shares of CubeSmart and debt securities of CubeSmart, L.P. (the “Operating
Partnership”), and the qualification and taxation of CubeSmart as a REIT under the Internal Revenue Code of 1986, as amended (the
“Code”). This discussion reflects changes to the U.S. federal income tax laws made by legislation commonly referred to as the Tax Cuts
and Jobs Act (the “TCJA”), which was signed into law on December 22, 2017, and the Coronavirus Aid, Relief, and Economic Security
Act (the “CARES Act”), which was signed into law on March 27, 2020.
This discussion is not exhaustive of all possible tax considerations and does not provide a detailed discussion of any
state, local or foreign tax considerations. The discussion does not address all aspects of taxation that may be relevant to particular investors
in light of their personal investment or tax circumstances, or to certain types of investors that are subject to special treatment under the
U.S. federal income tax laws, such as insurance companies, regulated investment companies, REITs, tax-exempt organizations (except to
the limited extent discussed below under “Taxation of Tax-Exempt Shareholders”), financial institutions or broker-dealers, non-U.S.
individuals and foreign corporations (except to the limited extent discussed below under “Taxation of Non-U.S. Shareholders”), an entity
treated as a U.S. corporation on account of the inversion rules, persons holding our securities as part of a “straddle,” “hedge,” “conversion
transaction,” “synthetic security” or other integrated investment, persons subject to the alternative minimum tax provisions of the Code,
persons holding our securities through a partnership or similar pass-through entity and other persons subject to special tax rules. This
summary deals only with investors who hold common shares or preferred shares of CubeSmart or debt securities of the Operating
Partnership as “capital assets” within the meaning of Section 1221 of the Code. This discussion is not intended to be, and should not be
construed as, tax advice.
The statements in this section are not intended to be, and should not be construed as, tax advice. The information in this
summary is based on the Code, current, temporary and proposed Treasury regulations, the legislative history of the Code, current
administrative interpretations and practices of the Internal Revenue Service (the “IRS”), including its practices and policies as endorsed in
private letter rulings, which are not binding on the IRS, and existing court decisions. Future legislation, regulations, administrative
interpretations and court decisions could change current law or adversely affect existing interpretations of current law. Any change could
apply retroactively. We have not obtained any rulings from the IRS concerning the tax treatment of the matters discussed in this summary.
Therefore, it is possible that the IRS could challenge the statements in this summary, which do not bind the IRS or the courts, and that a
court could agree with the IRS.
We urge you to consult your own tax advisor regarding the specific tax consequences to you of ownership of
common shares or preferred shares of CubeSmart and debt securities of the Operating Partnership, and of CubeSmart’s election
to be taxed as a REIT. Specifically, you should consult your own tax advisor regarding the federal, state, local, foreign, and other
tax consequences of such ownership and election, and regarding potential changes in applicable tax laws.
Taxation of CubeSmart
Qualification of CubeSmart as a REIT
CubeSmart elected to be taxed as a REIT under the U.S. federal income tax laws beginning with its short taxable year
ended December 31, 2004. CubeSmart believes that, beginning with such short taxable year, it has been organized and has operated in
such a manner as to qualify for taxation as a REIT under the Code and intends to continue to operate in such a manner. However, there can
be no assurance that CubeSmart has qualified or will remain qualified as a REIT.
CubeSmart’s continued qualification and taxation as a REIT depends upon its ability to meet on a continuing basis,
through actual annual operating results, certain qualification tests set forth in the U.S. federal income tax laws. Those qualification tests
involve the percentage of income that CubeSmart earns from specified sources, the percentage of its assets that falls within specified
categories, the diversity of its share ownership, and the percentage of its earnings that CubeSmart distributes. Accordingly, no assurance
can be given that the actual results of CubeSmart’s operations for any particular taxable year will satisfy such requirements. For a
discussion of the tax consequences of its failure to qualify as a REIT, see “Requirements for Qualification — Failure to Qualify” below.
Pursuant to CubeSmart’s declaration of trust, CubeSmart’s board of trustees has the authority to make any tax elections
on its behalf that, in its sole judgment, are in CubeSmart’s best interest. This authority includes the ability to revoke or otherwise terminate
CubeSmart’s status as a REIT. CubeSmart’s board of trustees has the authority under its declaration of trust to make these elections
without the necessity of obtaining the approval of CubeSmart’s shareholders. In addition, CubeSmart’s board of trustees has the authority
to waive any restrictions and limitations contained in its declaration of trust that are intended to preserve CubeSmart’s status as a REIT
during any period in which its board of trustees has determined not to pursue or preserve CubeSmart’s status as a REIT.
Taxation of CubeSmart as a REIT
The sections of the Code relating to qualification and operation as a REIT, and the U.S. federal income taxation of a
REIT, are highly technical and complex. The following discussion sets forth only the material aspects of those sections. This summary is
qualified in its entirety by the applicable Code provisions and the related rules and regulations.
If CubeSmart qualifies as a REIT, it generally will not be subject to federal income tax on the taxable income that it
distributes to its shareholders. The benefit of that tax treatment is that it avoids the “double taxation,” or taxation at both the corporate and
shareholder levels, that generally results from owning shares in a corporation. However, CubeSmart will be subject to federal tax in the
following circumstances:
CubeSmart is subject to the corporate federal income tax on any taxable income, including net capital gain that it does
not distribute to shareholders during, or within a specified time period after, the calendar year in which the income is
earned.
For tax years beginning before January 1, 2018, CubeSmart may be subject to the corporate “alternative minimum tax”
on any items of tax preference, including any deductions of net operating losses.
CubeSmart is subject to tax, at the highest corporate rate (35% for tax years beginning on or before December 31, 2017
and 21% for tax years beginning after that date), on net income from the sale or other disposition of property acquired
through foreclosure (“foreclosure property”) that it holds primarily for sale to customers in the ordinary course of
business, and other non-qualifying income from foreclosure property.
CubeSmart is subject to a 100% tax on net income from sales or other dispositions of property, other than foreclosure
property, that it holds primarily for sale to customers in the ordinary course of business.
If CubeSmart fails to satisfy one or both of the 75% gross income test or the 95% gross income test, as described below
under “Requirements for Qualification — Gross Income Tests,” but nonetheless continues to qualify as a REIT because
it meets other requirements, CubeSmart will be subject to a 100% tax on: the greater of the amount by which it fails the
75% gross income test or the 95% gross income test multiplied, in either case, by a fraction intended to reflect its
profitability.
If CubeSmart fails to distribute during a calendar year at least the sum of: (1) 85% of its REIT ordinary income for the
year, (2) 95% of its REIT capital gain net income for the year, and (3) any undistributed taxable income required to be
distributed from earlier periods, then CubeSmart will be subject to a 4% nondeductible excise tax on the excess of the
required distribution over the amount it actually distributed.
If CubeSmart fails any of the asset tests, as described below under “Requirements for Qualification — Asset Tests,”
other than certain de minimis failures, but its failure was due to reasonable cause and not to willful neglect, and it
nonetheless maintains its REIT qualification because of specified cure provisions, CubeSmart will pay a tax equal to the
greater of $50,000 or the highest federal income tax rate (currently 21%) then applicable to U.S. corporations on the net
income from the nonqualifying assets during the period in which it failed to satisfy the asset tests.
The amount of gain on which CubeSmart will pay tax generally is the lesser of the amount of gain that it recognizes at
the time of the sale or disposition, and the amount of gain that it would have recognized if it had sold the asset at the
time CubeSmart acquired it.
If CubeSmart fails to satisfy one or more requirements for REIT qualification, other than the gross income tests and the
asset tests, and such failure is due to reasonable cause and not to willful neglect, it will be required to pay a penalty of
$50,000 for each such failure.
CubeSmart may elect to retain its net long-term capital gain and pay income tax on such gain.
CubeSmart will be subject to a 100% excise tax on transactions with a taxable REIT subsidiary that are not conducted on
an arm’s-length basis.
If CubeSmart acquires any asset from a C corporation (a corporation that generally is subject to full corporate-level tax)
in a transaction in which the adjusted basis of the assets in CubeSmart’s hands is determined by reference to the adjusted
tax basis of the asset in the hands of the C corporation, CubeSmart will pay tax at the highest regular corporate rate then
applicable (35% for tax years beginning on or before December 31, 2017 and 21% for tax years beginning after that
date) if it recognizes gain on the sale or disposition of the asset during the 5-year period after it acquires the asset, unless
the C corporation elects to treat the assets as if they were sold for their fair market value at the time of CubeSmart’s
acquisition.
CubeSmart may be required to pay monetary penalties to the IRS in certain circumstances, including if it fails to meet
record-keeping requirements intended to monitor its compliance with rules relating to the composition of a REIT’s
shareholders, as described below in “Requirements for Qualification – Organizational Requirements - Recordkeeping
Requirements.”
The earnings of CubeSmart’s lower-tier entities, if any, that are subchapter C corporations, including taxable REIT
subsidiaries, are subject to federal corporate income tax.
In addition, we may be subject to a variety of taxes, including payroll taxes and state, local and foreign income, property
and other taxes on our assets and operations. We could also be subject to tax in situations and on transactions not presently contemplated.
Requirements for Qualification
(a) organizational requirements, (b) gross income tests, (c) asset tests and (d) annual distribution requirements.
To qualify as a REIT, CubeSmart must elect to be treated as a REIT, and CubeSmart must meet various
Organizational Requirements. A REIT is a corporation, trust or association that meets each of the following
requirements:
tax laws;
1) It is managed by one or more trustees or directors;
2) Its beneficial ownership is evidenced by transferable shares, or by transferable certificates of beneficial interest;
3) It would be taxable as a domestic corporation, but for Sections 856 through 860 of the Code;
4) It is neither a financial institution nor an insurance company subject to special provisions of the U.S. federal income
rules of attribution);
5) At least 100 persons are beneficial owners of its shares or ownership certificates (determined without reference to any
or fewer individuals, which the U.S. federal income tax laws define to include certain entities, during the last half of any taxable year;
6) Not more than 50% in value of its outstanding shares or ownership certificates is owned, directly or indirectly, by five
7) It elects to be a REIT, or has made such election for a previous taxable year which has not been revoked or
terminated, and satisfies all relevant filing and other administrative requirements established by the IRS that must be met to elect and
maintain REIT status;
U.S. federal income tax laws; and
8) It uses a calendar year for U.S. federal income tax purposes and complies with the recordkeeping requirements of the
income.
9) It meets certain other tests, described below, regarding the nature of its income and assets and the distribution of its
CubeSmart must meet requirements 1 through 4, 8 and 9 during its entire taxable year and must meet requirement 5
during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months.
CubeSmart’s declaration of trust provides for restrictions regarding the ownership and transfer of its shares of beneficial interest that are
intended to assist CubeSmart in continuing to satisfy requirements 5 and 6. However, these restrictions may not ensure that CubeSmart
will, in all cases, be able to satisfy these requirements.
For purposes of determining share ownership under requirement 6, an “individual” generally includes a supplemental
unemployment compensation benefits plan, a private foundation, or a portion of a trust permanently set aside or used exclusively for
charitable purposes. An “individual,” however, generally does not include a trust that is a qualified employee pension or profit sharing
trust under the U.S. federal income tax laws, and beneficiaries of such a trust will be treated as holding CubeSmart’s shares in proportion
to their actuarial interests in the trust for purposes of requirement 6. CubeSmart believes it has issued sufficient shares of beneficial interest
with enough diversity of ownership to satisfy requirements 5 and 6 set forth above.
Recordkeeping Requirements. To monitor compliance with the share ownership requirements, CubeSmart is required to
maintain records regarding the actual ownership of its shares. To do so, CubeSmart must demand written statements each year from the
record holders of certain percentages of its shares in which the record holders are to disclose the actual owners of the shares (the persons
required to include in gross income the dividends paid by us). A list of those persons failing or refusing to comply with this demand must
be maintained as part of CubeSmart’s records. Failure by CubeSmart to comply with these recordkeeping requirements could subject
CubeSmart to monetary penalties. If CubeSmart satisfies these requirements and has no reason to know that requirement 6 is not satisfied,
CubeSmart will be deemed to have satisfied such requirement. A shareholder that fails or refuses to comply with the demand is required
by Treasury Regulations to submit a statement with its tax return disclosing the actual ownership of the shares and other information.
Qualified REIT Subsidiaries. A corporation that is a “qualified REIT subsidiary” is not treated as a corporation separate
from its parent REIT. A “qualified REIT subsidiary” is a corporation, all of the capital stock of which is owned by the REIT and that has
not elected to be a taxable REIT subsidiary. All assets, liabilities, and items of income, deduction, and credit of a “qualified REIT
subsidiary” are treated as assets, liabilities, and items of income, deduction, and credit of the REIT. Thus, in applying the requirements
described herein, any “qualified REIT subsidiary” that CubeSmart owns will be ignored, and all assets, liabilities, and items of income,
deduction, and credit of such subsidiary will be treated as its assets, liabilities, and items of income, deduction, and credit.
Partnership Subsidiaries and other Pass-Through Subsidiaries. An unincorporated domestic entity, such as a partnership
or limited liability company that has a single owner, generally is not treated as an entity separate from its parent for U.S. federal income
tax purposes so that their income and assets are treated as income and assets of their regarded owners, including for purposes of the REIT
gross income and asset tests. An unincorporated domestic entity with two or more owners is generally treated as a partnership for U.S.
federal income tax purposes. In the case of a REIT that is a partner in a partnership, the REIT is treated as owning its proportionate share
of the assets of the partnership and as earning its allocable share of the gross income of the partnership for purposes of the applicable REIT
qualification tests. Thus, CubeSmart’s proportionate share of the assets, liabilities and items of income of the Operating Partnership and
any other partnership, joint venture, or limited liability company that is treated as a partnership for U.S. federal income tax purposes in
which CubeSmart acquires an interest, directly or indirectly (“Partnership Subsidiary”), is treated as CubeSmart’s assets and gross income
for purposes of applying the various REIT qualification requirements.
Taxable REIT Subsidiaries. A REIT is permitted to own up to 100% of the stock of one or more “taxable REIT
subsidiaries.” A taxable REIT subsidiary is a corporation subject to U.S. federal income tax, and state and local income tax where
applicable, as a regular “C” corporation. The subsidiary and the REIT must jointly elect to treat the subsidiary as a taxable REIT
subsidiary. In addition, if a taxable REIT subsidiary owns, directly or indirectly, securities representing 35% or more of the vote or value
of a subsidiary corporation, that subsidiary will also be treated as a taxable REIT subsidiary. Several provisions regarding the
arrangements between a REIT and its taxable REIT subsidiaries ensure that a taxable REIT subsidiary will be subject to an appropriate
level of U.S. federal income taxation. For example, the taxable REIT subsidiary rules limit the deductibility of interest paid or accrued by a
taxable REIT subsidiary to its parent REIT. Further, the rules impose a 100% excise tax on transactions between a taxable REIT subsidiary
and its parent REIT or the REIT’s tenants that are not conducted on an arm’s-length basis, and, effective for taxable years beginning after
December 31, 2015, on income imputed to a taxable REIT subsidiary, for services rendered to or on behalf of CubeSmart, the Operating
Partnership, any qualified REIT subsidiary, or a Partnership Subsidiary. CubeSmart may engage in activities indirectly through a taxable
REIT subsidiary that would jeopardize its REIT status if CubeSmart engaged in the activities directly. For example, a taxable REIT
subsidiary of CubeSmart may provide services to unrelated parties which might produce income that does not qualify under the gross
income tests described below. A taxable REIT subsidiary may also engage in other activities that, if conducted by CubeSmart directly,
could result in the receipt of non-qualified income or the ownership of non-qualified assets or the imposition of the 100% tax on income
from prohibited transactions. See description below under “Requirements for Qualification – Gross Income Tests - Prohibited
Transactions.” Overall, no more than 20% (25% for taxable years beginning before January 1, 2018) of the value of a REIT’s assets may
constitute stock or securities of one or more taxable REIT subsidiaries. Under the TCJA, for taxable years beginning after December 31,
2017, taxpayers are subject to a limitation on their ability to deduct net business interest generally equal to 30% of adjusted taxable
income, subject to certain exceptions. The CARES Act (i) increases the 30% limitation to 50% (A) for taxable years beginning in 2020 and
(B) for taxable years beginning in 2019 for entities other than partnerships and (ii) permits an entity to elect to use its 2019 adjusted
taxable income to calculate the applicable limitation for its taxable year beginning in 2020. These provisions may limit the ability of our
taxable REIT subsidiaries to deduct interest, which could increase their taxable income.
Gross Income Tests. CubeSmart must satisfy two gross income tests annually to maintain its qualification as a REIT.
First, at least 75% of its gross income for each taxable year must consist of defined types of income that CubeSmart derives, directly or
indirectly, from investments relating to real property or mortgages on real property or qualified temporary investment income. Qualifying
income for purposes of that 75% gross income test generally includes:
rents from real property;
interest on debt secured by mortgages on real property or on interests in real property (including certain types of
mortgage-backed securities);
for taxable years beginning after December 31, 2015, interest on mortgage loans secured by both real and personal
property if the fair market value of such personal property does not exceed 15% of the total fair market value of all
property securing the loans;
dividends or other distributions on, and gain from the sale of, shares in other REITs (excluding dividends from its
taxable REIT subsidiaries);
gain from the sale of real estate assets (other than gain from property held primarily for sale to customers), except,
effective for taxable years beginning after December 31, 2015, for gain from a nonqualified publicly offered REIT debt
instrument (as defined below);
income and gain derived from foreclosure property; and
income derived from the temporary investment of new capital that is attributable to the issuance of CubeSmart’s shares
of beneficial interest or a public offering of its debt with a maturity date of at least five years and that CubeSmart
receives during the one-year period beginning on the date on which it receives such new capital.
Second, in general, at least 95% of CubeSmart’s gross income for each taxable year must consist of income that is
qualifying income for purposes of the 75% gross income test, other types of interest and dividends (including dividends from its taxable
REIT subsidiaries), gain from the sale or disposition of stock or securities, or any combination of these.
Gross income from the sale of property that CubeSmart holds primarily for sale to customers in the ordinary course of
business is excluded from both the numerator and the denominator in both income tests. See “Prohibited Transactions.” In addition, certain
gains from hedging transactions and certain foreign currency gains will be excluded from both the numerator and the denominator for
purposes of one or both of the income tests. See “Hedging Transactions” and “Foreign Currency Gain.”
which is qualifying income for purposes of the 75% and 95% gross income tests, only if the following conditions are met:
Rents from Real Property. Rent that CubeSmart receives from its real property will qualify as “rents from real property,”
First, the rent must not be based in whole or in part on the income or profits of any person. Such rent, however, will
qualify as “rents from real property” if it is based on percentages of receipts or sales and the percentages are fixed at the time the leases are
entered into, are not renegotiated during the term of the leases in a manner that has the effect of basing percentage rent on income or
profits, and conform with normal business practice.
Second, CubeSmart must not own, actually or constructively, 10% or more of the stock of any corporate tenant or the
assets or net profits of any tenant, referred to as a related party tenant, other than a taxable REIT subsidiary. The constructive ownership
rules generally provide that, if 10% or more in value of its shares is owned, directly or indirectly, by or for any person, CubeSmart is
considered as owning the stock owned, directly or indirectly, by or for such person. CubeSmart does not own any stock or any assets or net
profits of any tenant directly. However, because the constructive ownership rules are broad and it is not possible to monitor continually
direct and indirect transfers of its shares, no absolute assurance can be given that such transfers or other events of which CubeSmart has no
knowledge will not cause CubeSmart to own constructively 10% or more of a tenant (or a subtenant, in which case only rent attributable to
the subtenant is disqualified) other than a taxable REIT subsidiary at some future date.
Under an exception to the related-party tenant rule described in the preceding paragraph, rent that CubeSmart receives
from a taxable REIT subsidiary will qualify as “rents from real property” as long as (1) at least 90% of the leased space in the property is
leased to persons other than taxable REIT subsidiaries and related-party tenants, and (2) the amount paid by the taxable REIT subsidiary to
rent space at the property is substantially comparable to rents paid by other tenants of the property for comparable space. The
“substantially comparable” requirement must be satisfied when the lease is entered into, when it is extended, and when the lease is
modified, if the modification increases the rent paid by the taxable REIT subsidiary. If the requirement that at least 90% of the leased
space in the related property is rented to unrelated tenants is met when a lease is entered into, extended, or modified, such requirement will
continue to be met as long as there is no increase in the space leased to any taxable REIT subsidiary or related party tenant. Any increased
rent attributable to a modification of a lease with a taxable REIT subsidiary in which CubeSmart owns directly or indirectly more than
50% of the voting power or value of the stock (a “controlled taxable REIT subsidiary”) will not be treated as “rents from real property.”
Third, the rent attributable to the personal property leased in connection with a lease of real property must not be greater
than 15% of the total rent received under the lease. The rent attributable to personal property under a lease is the amount that bears the
same ratio to total rent under the lease for the taxable year as the average of the fair market values of the leased personal property at the
beginning and at the end of the taxable year bears to the average of the aggregate fair market values of both the real and personal property
covered by the lease at the beginning and at the end of such taxable year (the “personal property ratio”). With respect to each of its leases,
CubeSmart believes that the personal property ratio generally is less than 15%. Where that is not, or may in the future not be, the case,
CubeSmart believes that any income attributable to personal property will not jeopardize its ability to qualify as a REIT. There can be no
assurance, however, that the IRS would not challenge CubeSmart’s calculation of a personal property ratio, or that a court would not
uphold such assertion. If such a challenge were successfully asserted, CubeSmart could fail to satisfy the 75% or 95% gross income test
and thus lose its REIT status.
Fourth, CubeSmart cannot furnish or render non-customary services to the tenants of its properties, or manage or operate
its properties, other than through an independent contractor who is adequately compensated and from whom CubeSmart does not derive or
receive any income. However, CubeSmart need not provide services through an “independent contractor,” but instead may provide
services directly to its tenants, if the services are “usually or customarily rendered” in connection with the rental of space for occupancy
only and are not considered to be provided for the tenants’ convenience. In addition, CubeSmart may provide a minimal amount of “non-
customary” services to the tenants of a property, other than through an independent contractor, as long as its income from the services does
not exceed 1% of its income from the related property.
Finally, CubeSmart may own up to 100% of the stock of one or more taxable REIT subsidiaries, which may provide
non-customary services to CubeSmart’s tenants without tainting CubeSmart’s rents from the related properties. CubeSmart has not
performed, and does not intend to perform, any services other than customary ones for its tenants, other than services provided through
independent contractors or taxable REIT subsidiaries.
Tenants may be required to pay, in addition to base rent, reimbursements for certain amounts CubeSmart is obligated to
pay to third parties (such as a lessee’s proportionate share of a property’s operational or capital expenses), penalties for nonpayment or late
payment of rent or additions to rent. These and other similar payments should qualify as “rents from real property.” To the extent they do
not, they should be treated as interest that qualifies for the 95% gross income test.
If a portion of the rent CubeSmart receives from a property does not qualify as “rents from real property” because the
rent attributable to personal property exceeds 15% of the total rent for a taxable year, the portion of the rent attributable to personal
property will not be qualifying income for purposes of either the 75% or 95% gross income test. Thus, if rent attributable to personal
property, plus any other income that is nonqualifying income for purposes of the 95% gross income test, during a taxable year exceeds 5%
of its gross income during the year, CubeSmart would lose its REIT status, unless CubeSmart qualified for certain statutory relief
provisions. By contrast, in the following circumstances, none of the rent from a lease of property would qualify as “rents from real
property”: (1) the rent is considered based on the income or profits of the tenant; (2) the lessee is a related party tenant or fails to qualify
for the exception to the related-party tenant rule for qualifying taxable REIT subsidiaries; or (3) CubeSmart furnishes non-customary
services to the tenants of the property, or manages or operates the property, other than through a qualifying independent contractor or a
taxable REIT subsidiary. In any of these circumstances, CubeSmart could lose its REIT status, unless CubeSmart qualified for certain
statutory relief provisions, because it would be unable to satisfy either the 75% or 95% gross income test.
Interest. The term “interest” generally does not include any amount received or accrued, directly or indirectly, if the
determination of the amount depends in whole or in part on the income or profits of any person. However, an amount received or accrued
generally will not be excluded from the term “interest” solely because it is based on a fixed percentage or percentages of receipts or sales.
Furthermore, to the extent that interest from a loan that is based on the profit or net cash proceeds from the sale of the property securing
the loan constitutes a “shared appreciation provision,” income attributable to such participation feature will be treated as gain from the sale
of the secured property, which generally is qualifying income for purposes of both gross income tests.
Prohibited Transactions. A REIT will incur a 100% tax on the net income derived from any sale or other disposition of
property, other than foreclosure property, that the REIT holds primarily for sale to customers in the ordinary course of a trade or business.
Whether a REIT holds an asset “primarily for sale to customers in the ordinary course of a trade or business” depends, however, on the
facts and circumstances in effect from time to time, including those related to a particular asset. A safe harbor to the characterization of the
sale of property by a REIT as a prohibited transaction and the 100% prohibited transaction tax is available if the following requirements
are met:
the REIT has held the property for not less than two years;
the aggregate expenditures made by the REIT, or any partner of the REIT, during the two-year period preceding the date
of the sale that are includable in the basis of the property do not exceed 30% of the selling price of the property;
either (1) during the year in question, the REIT did not make more than seven sales of property other than foreclosure
property or sales to which Section 1033 of the Code applied, (2) the aggregate adjusted bases of all such properties sold
by the REIT during the year did not exceed 10% of the aggregate bases of all of the assets of the REIT at the beginning
of the year, (3) the aggregate fair market value of all such properties sold by the REIT during the year did not exceed
10% of the aggregate fair market value of all of the assets of the REIT at the beginning of the year, (4) (i) for taxable
years beginning after December 31, 2015, the aggregate adjusted bases of all such properties sold by the REIT during the
year did not exceed 20% of the aggregate bases of all of the assets of the REIT at the beginning of the year and (ii) the
average annual percentage of such properties sold by the REIT compared to all the REIT’s assets (measured by adjusted
tax bases) in the current and two prior years did not exceed 10%, or (5) (i) the aggregate fair market value of all such
properties sold by the REIT during the year did not exceed 20% of the aggregate fair market value of all assets of the
REIT at the beginning of the year and (ii) the average annual percentage of such properties sold by the REIT compared
to all the REIT’s assets (measured by fair market value) in the current and two prior years did not exceed 10%;
in the case of property not acquired through foreclosure or lease termination, the REIT has held the property for at least
two years for the production of rental income; and
if the REIT has made more than seven sales of non-foreclosure property during the taxable year, substantially all of the
marketing and development expenditures with respect to the property were made through an independent contractor (or,
for taxable years beginning after December 31, 2015, a taxable REIT subsidiary) from whom the REIT derives no
income.
CubeSmart intends to hold properties for investment with a view to long-term appreciation, to engage in the business of
acquiring, developing, owning and operating properties, and to make occasional sales of properties as are consistent with its investment
objective. CubeSmart cannot assure you, however, that it can comply with the safe-harbor provisions that would prevent the imposition of
the 100% tax or that it will avoid owning property that may be characterized as property held “primarily for sale to customers in the
ordinary course of a trade or business.” The 100% tax does not apply to gains from the sale of property that is held through a taxable REIT
subsidiary or other taxable corporation, although such income will be subject to tax in the hands of that corporation at regular corporate tax
rates. CubeSmart may, therefore, form or acquire a taxable REIT subsidiary to hold and dispose of those properties it concludes may not
fall within the safe-harbor provisions.
Foreclosure Property. CubeSmart will be subject to tax at the maximum corporate rate (35% for tax years beginning on
or before December 31, 2017 and 21% for tax years beginning after that date) on any net income from foreclosure property, other than
income that otherwise would be qualifying income for purposes of the 75% gross income test. “Foreclosure property” is any real property,
including interests in real property, and any personal property incident to such real property:
that is acquired by a REIT as the result of the REIT having bid on such property at foreclosure, or having otherwise
reduced such property to ownership or possession by agreement or process of law, after there was a default or default
was imminent on a lease of such property or on indebtedness that such property secured;
for which the related loan or leased property was acquired by the REIT at a time when the default was not imminent or
anticipated; and
for which the REIT makes a proper election to treat the property as foreclosure property.
A REIT will not be considered to have foreclosed on a property where the REIT takes control of the property as a
mortgagee-in-possession and cannot receive any profit or sustain any loss except as a creditor of the mortgagor. Property generally ceases
to be foreclosure property at the end of the third taxable year following the taxable year in which the REIT acquired the property (or longer
if an extension is granted by the Secretary of the Treasury). This period (as extended, if applicable) terminates, and foreclosure property
ceases to be foreclosure property, on the first day:
on which a lease is entered into for the property that, by its terms, will give rise to income that does not qualify for
purposes of the 75% gross income test, or any amount is received or accrued, directly or indirectly, pursuant to a lease
entered into on or after such day that will give rise to income that does not qualify for purposes of the 75% gross income
test;
on which any construction takes place on the property, other than completion of a building or, any other improvement,
where more than 10% of the construction was completed before default became imminent; or
which is more than 90 days after the day on which the REIT acquired the property and the property is used in a trade or
business which is conducted by the REIT, other than through an independent contractor from whom the REIT itself does
not derive or receive any income.
Any gain from the sale of property for which a foreclosure property election has been made will not be subject to the
100% tax on gains from prohibited transactions described above, even if the property is held primarily for sale to customers in the ordinary
course of a trade or business. Income and gain from foreclosure property are qualifying income for the 75% and 95% gross income tests.
Hedging Transactions. From time to time, CubeSmart enters into hedging transactions with respect to its assets or
liabilities. CubeSmart’s hedging activities may include entering into interest rate swaps, caps, and floors, options to purchase such items,
and futures and forward contracts. Income and gain from “hedging transactions” will be excluded from gross income for purposes of both
the 75% and 95% gross income tests. A “hedging transaction” means either (1) any transaction entered into in the normal course of its
trade or business primarily to manage the risk of interest rate, price changes, or currency fluctuations with respect to borrowings made or
to be made, or ordinary obligations incurred or to be incurred, to acquire or carry real estate assets or (2) any transaction entered into
primarily to manage the risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the
75% or 95% gross income test (or any property which generates such income or gain). CubeSmart will be required to clearly identify any
such hedging transaction before the close of the day on which it was acquired, originated, or entered into and to satisfy other identification
requirements. No assurance can be given that its hedging activities will not give rise to income that does not qualify for purposes of either
or both of the gross income tests, and will not adversely affect CubeSmart’s ability to satisfy the REIT qualification requirements.
Effective for taxable years beginning after December 31, 2015, if CubeSmart has entered into a hedging transaction
described in (1) or (2), and a portion of the hedged indebtedness or property is extinguished or disposed of and, in connection with such
extinguishment or disposition, CubeSmart enters into a new clearly identified hedging transaction (a “New Hedge”), income from the
applicable hedge and income from the New Hedge (including gain from the disposition of such New Hedge) will not be treated as gross
income for purposes of the 95% and 75% gross income tests.
Foreign Currency Gain. Certain foreign currency gains will be excluded from gross income for purposes of one or both
of the gross income tests. “Real estate foreign exchange gain” will be excluded from gross income for purposes of the 75% gross income
test. Real estate foreign exchange gain generally includes foreign currency gain attributable to any item of income or gain that is qualifying
income for purposes of the 75% gross income test, foreign currency gain attributable to the acquisition or ownership of (or becoming or
being the obligor under) obligations secured by mortgages on real property or on interests in real property and certain foreign currency
gain attributable to certain “qualified business units” of a REIT. “Passive foreign exchange gain” will be excluded from gross income for
purposes of the 95% gross income test. Passive foreign exchange gain generally includes real estate foreign exchange gain as described
above, and also includes foreign currency gain attributable to any item of income or gain that is qualifying income for purposes of the 95%
gross income test and foreign currency gain attributable to the acquisition or ownership of (or becoming or being the obligor under) debt
obligations. Because passive foreign exchange gain includes real estate foreign exchange gain, real estate foreign exchange gain is
excluded from gross income for purposes of both the 75% and 95% gross income test. These exclusions for real estate foreign exchange
gain and passive foreign exchange gain do not apply to foreign currency gain derived from dealing, or engaging in substantial and regular
trading, in securities. Such gain is treated as nonqualifying income for purposes of both the 75% and 95% gross income tests.
Failure to Satisfy Gross Income Tests. If CubeSmart fails to satisfy one or both of the gross income tests for any taxable
year, CubeSmart nevertheless may qualify as a REIT for that year if it qualifies for relief under certain provisions of the U.S. federal
income tax laws. Those relief provisions will be available if:
CubeSmart’s failure to meet those tests is due to reasonable cause and not to willful neglect; and
following such failure for any taxable year, a schedule of the sources of its income is filed with the IRS in accordance
with regulations prescribed by the Secretary of the Treasury.
CubeSmart cannot predict, however, whether any failure to meet these tests will qualify for the relief provisions. As
discussed above in “Taxation of CubeSmart as a REIT,” even if the relief provisions apply, CubeSmart would incur a 100% tax on the
gross income attributable to the greater of (1) the amount by which it fails the 75% gross income test, or (2) the excess of 95% of its gross
income over the amount of gross income qualifying under the 95% gross income test, multiplied, in either case, by a fraction intended to
reflect its profitability.
each quarter of each taxable year.
Asset Tests. To maintain its qualification as a REIT, CubeSmart also must satisfy the following asset tests at the end of
First, at least 75% of the value of CubeSmart’s total assets must consist of:
cash or cash items, including certain receivables;
government securities;
interests in real property, including leaseholds and options to acquire real property and leaseholds;
effective for taxable years beginning after December 31, 2015: (i) personal property leased in connection with real
property to the extent that the rents from personal property are treated as “rent from real property” for purposes of the
75% income test, and (ii) debt instruments issued by publicly offered REITs;
interests in mortgages on real property (including certain mortgage-backed securities) and, for taxable years beginning
after December 31, 2015, interests in mortgage loans secured by both real and personal property if the fair market value
of such personal property does not exceed 15% of the total fair market value of all property securing the loans;
stock in other REITs; and
investments in stock or debt instruments during the one-year period following its receipt of new capital that CubeSmart
raises through equity offerings or public offerings of debt with at least a five-year term.
securities may not exceed 5% of the value of its total assets, or the “5% asset test.”
Second, of CubeSmart’s investments not included in the 75% asset class, the value of its interest in any one issuer’s
voting power or value of any one issuer’s outstanding securities, or the “10% vote test” and “10% value test,” respectively.
Third, of CubeSmart’s investments not included in the 75% asset class, CubeSmart may not own more than 10% of the
may be represented by securities of one or more taxable REIT subsidiaries.
Fourth, not more than 20% (25% for taxable years beginning before January 1, 2018) of the value of CubeSmart’s assets
Fifth, effective for taxable years beginning after December 31, 2015, not more than 25% of the value of CubeSmart’s
total assets may be represented by “nonqualified publicly offered REIT debt instruments.” “Nonqualified publicly offered REIT debt
instruments” are debt instruments issued by publicly offered REITs that are not secured by a mortgage on real property.
75% test.
Sixth, not more than 25% of the value of our total assets may consist of securities other than securities satisfying the
For purposes of the 5% asset test, the 10% vote test and 10% value test, the term “securities” does not include stock in
another REIT, equity or debt securities of a qualified REIT subsidiary or taxable REIT subsidiary, mortgage loans that constitute real
estate assets, or equity interests in a partnership. The term “securities,” however, generally includes debt securities issued by a partnership
or another REIT, except that for purposes of the 10% value test, the term “securities” does not include:
Any “straight debt” security, which is defined as a written unconditional promise to pay on demand or on a specified
date a sum certain in money if (i) the debt is not convertible, directly or indirectly, into stock, and (ii) the interest rate
and interest payment dates are not contingent on profits, the borrower’s discretion, or similar factors. “Straight debt”
securities do not include any securities issued by a partnership or a corporation in which CubeSmart or any controlled
taxable REIT subsidiary hold non-”straight debt” securities that have an aggregate value of more than 1% of the issuer’s
outstanding securities. However, “straight debt” securities include debt subject to the following contingencies: (1) a
contingency relating to the time of payment of interest or principal, as long as either (i) there is no change to the
effective yield of the debt obligation, other than a change to the annual yield that does not exceed the greater of 0.25% or
5% of the annual yield, or (ii) neither the aggregate issue price nor the aggregate face amount of the issuer’s debt
obligations held by CubeSmart exceeds $1 million and no more than 12 months of unaccrued interest on the debt
obligations can be required to be prepaid; and (2) a contingency relating to the time or amount of payment upon a default
or prepayment of a debt obligation, as long as the contingency is consistent with customary commercial practice.
Any loan to an individual or an estate.
Any “section 467 rental agreement,” other than an agreement with a related party tenant.
Any obligation to pay “rents from real property.”
Certain securities issued by governmental entities.
Any security issued by a REIT.
Any debt instrument issued by an entity treated as a partnership for U.S. federal income tax purposes in which
CubeSmart is a partner to the extent of CubeSmart’s proportionate interest in the debt and equity securities of the
partnership.
Any debt instrument issued by an entity treated as a partnership for U.S. federal income tax purposes not described in the
preceding bullet points if at least 75% of the partnership’s gross income, excluding income from prohibited transactions,
is qualifying income for purposes of the 75% gross income test described above in “Requirements for Qualification —
Gross Income Tests.”
any securities issued by the partnership, without regard to the securities described in the last two bullet points above.
For purposes of the 10% value test, its proportionate share of the assets of a partnership is its proportionate interest in
Failure to Satisfy Asset Tests. CubeSmart will monitor the status of its assets for purposes of the various asset tests and
will manage its portfolio in order to comply at all times with such tests. If CubeSmart fails to satisfy the asset tests at the end of a calendar
quarter, it would not lose its REIT status if:
CubeSmart satisfied the asset tests at the end of the preceding calendar quarter; and
the discrepancy between the value of its assets and the asset test requirements arose from changes in the market values
of its assets and was not wholly or partly caused by the acquisition of one or more non-qualifying assets.
If the failure to satisfy the asset tests results from an acquisition of securities or other property during a quarter, the
failure can be cured by disposition of sufficient nonqualifying assets within 30 days after the close of that quarter. CubeSmart intends to
maintain adequate records of the value of its assets to ensure compliance with the asset tests, and to take such other action within 30 days
after the close of any quarter as may be required to cure any noncompliance. However, there can be no assurance that such other action
will always be successful. If CubeSmart fails to cure any noncompliance with the asset tests within such time period, its status as a REIT
would be lost.
In the event that, at the end of any calendar quarter, CubeSmart violates the 5% asset test, the 10% vote test or the 10%
value test described above, CubeSmart will not lose its REIT status if (i) the failure is de minimis (up to the lesser of 1% of its assets or
$10 million) and (ii) CubeSmart disposes of assets or otherwise complies with the asset tests within six months after the last day of the
quarter in which it identifies such failure. In the event the failure to meet the asset test is more than de minimis, CubeSmart will not lose its
REIT status if (i) the failure was due to reasonable cause and not to willful neglect, (ii) CubeSmart files a description of each asset causing
the failure with the IRS, (iii) CubeSmart disposes of assets or otherwise complies with the asset tests within six months after the last day of
the quarter in which CubeSmart identifies the failure, and (iv) CubeSmart pays a tax equal to the greater of $50,000 or 35% (for tax years
beginning on or before December 31, 2017 and 21% for tax years beginning after that date) of the net income from the nonqualifying
assets during the period in which it failed to satisfy the asset tests.
dividends and deemed distributions of retained capital gain, to its shareholders in an aggregate amount not less than the sum of
Annual Distribution Requirements. Each taxable year, CubeSmart must distribute dividends, other than capital gain
90% of its “REIT taxable income,” computed without regard to the dividends paid deduction and its net capital gain or
loss, and
90% of its after-tax net income, if any, from foreclosure property, minus
the sum of certain items of non-cash income.
Under the TCJA, for taxable years beginning after December 31, 2017, CubeSmart’s deduction for net business interest
expense generally will be limited to 30% of its taxable income, as adjusted for certain items of income, gain, deduction or loss. The
CARES Act (i) increases the 30% limitation to 50% (A) for taxable years beginning in 2020 and (B) for taxable years beginning in 2019
for entities other than partnerships and (ii) permits an entity to elect to use its 2019 adjusted taxable income to calculate the applicable
limitation for its taxable year beginning in 2020. Any business interest deduction that is disallowed due to this limitation may be carried
forward to future taxable years. If CubeSmart is subject to this interest expense limitation, its REIT taxable income for a taxable year may
be increased. Taxpayers that conduct certain real estate businesses may elect not to have this interest expense limitation apply to them,
provided that they use an alternative depreciation system to depreciate certain property. CubeSmart may be eligible to make this election.
If CubeSmart makes this election, although it would not be subject to the interest expense limitation described above, its depreciation
deductions may be reduced and, as a result, its REIT taxable income for a taxable year may be increased.
Generally, CubeSmart must pay such distributions in the taxable year to which they relate, or in the following taxable
year if either (a) CubeSmart declares the distribution before it timely files its U.S. federal income tax return for the year and pays the
distribution on or before the first regular dividend payment date after such declaration or (b) CubeSmart declares the distribution in
October, November, or December of the taxable year, payable to shareholders of record on a specified day in any such month, and
CubeSmart actually pays the dividend before the end of January of the following year. In both instances, these distributions relate to its
prior taxable year for purposes of the 90% distribution requirement.
In order for distributions to be counted towards CubeSmart’s distribution requirement, and to provide a tax deduction to
CubeSmart, for taxable years ending on or before December 31, 2014, they must not be “preferential dividends.” A dividend is not a
preferential dividend if it is pro rata among all outstanding shares within a particular class, and is in accordance with the preferences
among the different classes of shares as set forth in CubeSmart’s organizational documents. For all subsequent taxable years, so long as
CubeSmart continues to be a “publicly offered REIT,” the preferential dividend rule will not apply.
To the extent that CubeSmart distributes at least 90%, but less than 100%, of its net taxable income, CubeSmart will be
subject to tax at ordinary corporate tax rates on the retained portion. In addition, CubeSmart may elect to retain, rather than distribute, its
net long-term capital gains and pay tax on such gains. In this case, CubeSmart would elect to have its shareholders include their
proportionate share of such undistributed long-term capital gains in their income and receive a corresponding credit for their proportionate
share of the tax paid by us. CubeSmart’s shareholders would then increase their adjusted basis in their CubeSmart shares by the difference
between the amount included in their long-term capital gains and the tax deemed paid with respect to their shares.
case of distributions with declaration and record dates falling in the last three months of the calendar year, at least the sum of:
If CubeSmart fails to distribute during a calendar year, or by the end of January of the following calendar year in the
85% of its REIT ordinary income for the year,
95% of its REIT capital gain income for the year, and
any undistributed taxable income from prior periods, CubeSmart will incur a 4% nondeductible excise tax on the excess
of such required distribution over the amounts CubeSmart actually distributed. In calculating the required distribution for
taxable years beginning after December 31, 2015, the amount that CubeSmart is treated as having distributed is not
reduced by any amounts not allowable in computing its taxable income for the taxable year and which were not
allowable in computing its taxable income for any prior years. If CubeSmart so elects, it will be treated as having
distributed any such retained amount for purposes of the 4% nondeductible excise tax described above.
It is possible that, from time to time, CubeSmart may experience timing differences between the actual receipt of income
and actual payment of deductible expenses and the inclusion of that income and deduction of such expenses in arriving at its REIT taxable
income. For example, because CubeSmart may deduct capital losses only to the extent of its capital gains, its REIT taxable income may
exceed its economic income. Further, it is possible that, from time to time, CubeSmart may be allocated a share of net capital gain from a
partnership in which CubeSmart owns an interest attributable to the sale of depreciated property that exceeds its allocable share of cash
attributable to that sale. Although several types of non-cash income are excluded in determining the annual distribution requirement,
CubeSmart will incur corporate income tax and the 4% nondeductible excise tax with respect to those non-cash income items if
CubeSmart does not distribute those items on a current basis. As a result of the foregoing, CubeSmart may have less cash than is necessary
to distribute all of its taxable income and thereby avoid corporate income tax and the 4% nondeductible excise tax imposed on certain
undistributed income. In such a situation, CubeSmart may issue additional common or preferred shares, CubeSmart may borrow or may
cause the Operating Partnership to arrange for short-term or possibly long-term borrowing to permit the payment of required distributions,
or CubeSmart may pay dividends in the form of taxable in-kind distributions of property, including potentially, its shares.
Under certain circumstances, CubeSmart may be able to correct a failure to meet the distribution requirement for a year
by paying “deficiency dividends” to its shareholders in a later year. CubeSmart may include such deficiency dividends in its deduction for
dividends paid for the earlier year. Although CubeSmart may be able to avoid income tax on amounts distributed as deficiency dividends,
CubeSmart will be required to pay interest to the IRS based upon the amount of any deduction it takes for deficiency dividends.
Failure to Qualify
If CubeSmart were to fail to qualify as a REIT in any taxable year and no relief provision applied, CubeSmart would
have the following consequences: CubeSmart would be subject to U.S. federal income tax and, for tax years beginning before January 1,
2018, any applicable alternative minimum tax at regular corporate rates applicable to regular C corporations on its taxable income,
determined without reduction for amounts distributed to shareholders. This REIT-level tax liability would reduce cash available for
distributions. All distributions to shareholders (to the extent of our current and accumulated earnings and profits) would be taxable as
dividends. This “double taxation” results from our failure to qualify as a REIT. In addition, if we fail to qualify as a REIT, we will not be
required to distribute any amounts to our shareholders and all distributions to shareholders will be taxable as regular corporate dividends to
the extent of our current and accumulated earnings and profits. In such event, corporate distributees may be eligible for the dividends-
received deduction. In addition, non-corporate shareholders, including individuals, may be eligible for the preferential tax rates on
qualified dividend income. Non-corporate shareholders, including individuals, generally may deduct up to 20% of dividends from a REIT,
other than capital gain dividends and dividends treated as qualified dividend income, for taxable years beginning after December 31, 2017
and before January 1, 2026 for purposes of determining their U.S. federal income tax (but not for purposes of the 3.8% Medicare tax),
subject to certain limitations. If we fail to qualify as a REIT, such shareholders may not claim this deduction with respect to dividends paid
by us. Unless CubeSmart qualified for relief under specific statutory provisions, it would not be permitted to elect taxation as a REIT for
the four taxable years following the year during which CubeSmart ceased to qualify as a REIT.
If CubeSmart fails to satisfy one or more requirements for REIT qualification, other than the gross income tests and the
asset tests, CubeSmart could avoid disqualification if its failure is due to reasonable cause and not to willful neglect and CubeSmart pays a
penalty of $50,000 for each such failure. In addition, there are relief provisions for a failure of the gross income tests and asset tests, as
described in “Requirements for Qualification — Gross Income Tests” and “Requirements for Qualification — Asset Tests.” It is not
possible to state whether in all circumstances CubeSmart would be entitled to such statutory relief.
State and Local Taxes
We may be subject to taxation by various states and localities, including those in which we transact business or own
property. The state and local tax treatment in such jurisdictions may differ from the U.S. federal income tax treatment described above.
Tax Aspects of Investments in the Operating Partnership and Subsidiary Partnerships
The following discussion summarizes certain U.S. federal income tax considerations applicable to CubeSmart’s direct or
indirect investment in its Operating Partnership and any subsidiary partnerships or limited liability companies we form or acquire that are
treated as partnerships for U.S. federal income tax purposes, each individually referred to as a “Partnership” and, collectively, as
“Partnerships” below. The following discussion does not address state or local tax laws or any federal tax laws other than income tax laws.
Classification as Partnerships. CubeSmart is required to include in its income its distributive share of each
Partnership’s income and to deduct its distributive share of each Partnership’s losses but only if such Partnership is classified for U.S.
federal income tax purposes as a partnership (or an entity that is disregarded for U.S. federal income tax purposes if the entity has only one
owner or member), rather than as a corporation or an association taxable as a corporation.
U.S. federal income tax purposes if it:
An organization with at least two owners or members will be classified as a partnership, rather than as a corporation, for
is treated as a partnership under the Treasury regulations relating to entity classification (the “check-the-box
regulations”); and
is not a “publicly traded partnership.”
Under the check-the-box regulations, an unincorporated domestic entity with at least two owners or members may elect
to be classified either as an association taxable as a corporation or as a partnership. If such an entity does not make an election, it generally
will be treated as a partnership for U.S. federal income tax purposes. We intend that each Partnership will be classified as a partnership for
U.S. federal income tax purposes (or else a disregarded entity where there are not at least two separate beneficial owners).
A publicly traded partnership is a partnership whose interests are traded on an established securities market or are readily
tradable on a secondary market (or a substantial equivalent). A publicly traded partnership is generally treated as a corporation for U.S.
federal income tax purposes, but will not be so treated if, for each taxable year beginning after December 31, 1987 in which it was
classified as a publicly traded partnership, at least 90% of the partnership’s gross income consisted of specified passive income, including
real property rents (which includes rents that would be qualifying income for purposes of the 75% gross income test, with certain
modifications that make it easier for the rents to qualify for the 90% passive income exception), gains from the sale or other disposition of
real property, interest, and dividends (the “90% passive income exception”).
Treasury regulations provide limited safe harbors from treatment as a publicly traded partnership. Pursuant to one of
those safe harbors (the “private placement exclusion”), interests in a partnership will not be treated as readily tradable on a secondary
market or the substantial equivalent thereof if (1) all interests in the partnership were issued in a transaction or transactions that were not
required to be registered under the Securities Act of 1933, as amended, and (2) the partnership does not have more than 100 partners at any
time during the partnership’s taxable year. For the determination of the number of partners in a partnership, a person owning an interest in
a partnership, grantor trust, or S corporation that owns an interest in the partnership is treated as a partner in the partnership only if
(1) substantially all of the value of the owner’s interest in the entity is attributable to the entity’s direct or indirect interest in the
partnership and (2) a principal purpose of the use of the entity is to permit the partnership to satisfy the 100-partner limitation. CubeSmart
believes that each Partnership should qualify for the private placement exclusion.
We have not requested, and do not intend to request, a ruling from the IRS that the Partnerships will be classified as
partnerships (or disregarded entities, if the entity has only one owner or member) for U.S. federal income tax purposes. If for any reason a
Partnership were taxable as a corporation, rather than as a partnership, for U.S. federal income tax purposes, CubeSmart may not be able to
qualify as a REIT, unless it qualifies for certain relief provisions. See “Requirements for Qualification — Gross Income Tests” and
“Requirements for Qualification — Asset Tests.” In addition, any change in a Partnership’s status for tax purposes might be treated as a
taxable event, in which case CubeSmart might incur tax liability without any related cash distribution. See “Requirements for Qualification
— Annual Distribution Requirements.” Further, items of income and deduction of such Partnership would not pass through to its partners,
and its partners would be treated as shareholders for tax purposes. Consequently, such Partnership would be required to pay income tax at
corporate rates on its net income, and distributions to its partners would constitute dividends that would not be deductible in computing
such Partnership’s taxable income.
Partners, Not the Partnerships, Subject to Tax. A partnership is not a taxable entity for U.S. federal income tax
purposes, except that, for tax years beginning after December 31, 2017, a partnership is liable for paying tax assessed pursuant to an audit
adjustment unless the partnership elects to “push out” such audit adjustments to its partners.
CubeSmart will therefore take into account its allocable share of each Partnership’s income, gains, losses, deductions,
and credits for each taxable year of the Partnerships ending with or within CubeSmart’s taxable year, even if CubeSmart receives no
distribution from the Partnerships for that year or a distribution less than CubeSmart’s share of taxable income. Similarly, even if
CubeSmart receives a distribution, CubeSmart may not be taxed on such distribution if the distribution does not exceed its adjusted tax
basis in its interest in the distributing Partnership.
Among the deductions that would flow to CubeSmart are the interest deductions of the Operating Partnership and its
subsidiary Partnerships. The TCJA limits a taxpayer’s business interest expense deduction to the sum of business interest income, 30% of
adjusted taxable income and certain other amounts. The CARES Act provision that increases the 30% limitation to 50% for taxable years
beginning in 2019 or 2020 does not apply to partnerships like the Operating Partnership with respect to taxable years beginning in 2019
(and thus, only applies with respect to taxable years beginning in 2020). However, under the CARES Act, the Operating Partnership may
elect to use its 2019 adjusted taxable income to calculate the applicable limitation for its taxable year beginning in 2020. Adjusted taxable
income does not include items of income or expense not allocable to a trade or business, business interest or expense, the new deduction
for qualified business income, NOLs, and for years prior to 2022, deductions for depreciation, amortization, or depletion. For partnerships,
the interest deduction limitation is applied at the partnership level, subject to certain adjustments to the partners for unused deduction
limitation at the partnership level. Unless we elect otherwise, 50% of our share of the Operating Partnership’s “excess business interest”
for its 2019 taxable year will be treated as paid by us in our 2020 taxable year and will not be subject to any limitation.
The TCJA allows a real property trade or business to elect out of this interest limitation so long as it uses a 40-year
recovery period for nonresidential real property, a 30-year recovery period for residential rental property, and a 20-year recovery period for
related improvements. Disallowed interest expense is carried forward indefinitely (subject to special rules for partnerships). The interest
deduction limitation applies to taxable years beginning after December 31, 2017.
For taxpayers that do not use the TCJA’s real property trade or business exception to the business interest deduction
limitations, the TCJA maintains the current 39-year and 27.5-year straight line recovery periods for nonresidential real property and
residential rental property, respectively, and provides that tenant improvements for such taxpayers are subject to a general 15-year
recovery period. Also, the TCJA temporarily allows 100% expensing of certain new or used tangible property through 2022, phasing out at
20% for each following year (with an election available for 50% expensing of such property if placed in service during the first taxable
year ending after September 27, 2017). The changes apply, generally, to property acquired after September 27, 2017 and placed in service
after September 27, 2017.
Partnership Allocations. Although a partnership agreement generally will determine the allocation of income and
losses among partners, allocations will be disregarded for tax purposes if they do not comply with the provisions of the U.S. federal
income tax laws governing partnership allocations. If an allocation is not recognized for U.S. federal income tax purposes, the item subject
to the allocation will be reallocated in accordance with the partners’ interests in the partnership, which will be determined by taking into
account all of the facts and circumstances relating to the economic arrangement of the partners with respect to such item.
Tax Allocations With Respect to Contributed Properties. Income, gain, loss, and deduction attributable to
(a) appreciated or depreciated property that is contributed to a partnership in exchange for an interest in the partnership or (b) property
revalued on the books of a partnership must be allocated in a manner such that each of a contributing partner or the partners at the time of a
book revaluation, as applicable, are charged with, or benefit from, respectively, the unrealized gain or unrealized loss associated with the
property at the time of the contribution. The amount of such unrealized gain or unrealized loss, referred to as “built-in gain” or “built-in
loss,” is generally equal to the difference between the fair market value of the contributed or revalued property at the time of contribution
or revaluation and the adjusted tax basis of such property at that time, referred to as a book-tax difference. Such allocations are solely for
U.S. federal income tax purposes and do not affect the book capital accounts or other economic or legal arrangements among the partners.
The U.S. Treasury Department has issued regulations requiring partnerships to use a “reasonable method” for allocating items with respect
to which there is a book-tax difference and outlining several reasonable allocation methods. Unless we, as general partner, select a
different method, the Operating Partnership will use the traditional method for allocating items with respect to which there is a book-tax
difference. Depending upon the method chosen, (1) CubeSmart’s tax depreciation deductions attributable to those properties may be lower
than they would have been if the partnership had acquired those properties for cash and (2) in the event of a sale of such properties,
CubeSmart could be allocated gain in excess of its corresponding economic or book gain. These allocations may cause CubeSmart to
recognize taxable income in excess of cash proceeds received by us, which might adversely affect CubeSmart’s ability to comply with the
REIT distribution requirements or result in CubeSmart’s shareholders recognizing additional dividend income without an increase in
distributions.
Depreciation. Some assets in our Partnerships include appreciated property contributed by its partners. Assets
contributed to a Partnership in a tax-free transaction generally retain the same depreciation method and recovery period as they had in the
hands of the partner who contributed them to the partnership. Accordingly, the Partnership’s depreciation deductions for such contributed
real property are based on the historic tax depreciation schedules for the properties prior to their contribution to the Operating Partnership.
Basis in Partnership Interest. CubeSmart’s adjusted tax basis in any partnership interest it owns generally will be:
the amount of cash and the basis of any other property it contributes to the partnership;
increased by its allocable share of the partnership’s income (including tax-exempt income) and its allocable share of
indebtedness of the partnership; and
reduced, but not below zero, by its allocable share of the partnership’s loss (excluding any non-deductible items), the
amount of cash and the basis of property distributed to CubeSmart, and constructive distributions resulting from a
reduction in its share of indebtedness of the partnership.
Loss allocated to CubeSmart in excess of its basis in a partnership interest will not be taken into account until
CubeSmart again has basis sufficient to absorb the loss. A reduction of CubeSmart’s share of partnership indebtedness will be treated as a
constructive cash distribution to CubeSmart, and will reduce its adjusted tax basis in the partnership. Distributions, including constructive
distributions, in excess of the basis of CubeSmart’s partnership interest will constitute taxable income to CubeSmart. Such distributions
and constructive distributions normally will be characterized as long-term capital gain.
Sale of a Partnership’s Property. Generally, any gain realized by a Partnership on the sale of property that is a capital
asset held for more than one year will be long-term capital gain, except for any portion of the gain treated as depreciation or cost recovery
recapture. Any gain or loss recognized by a Partnership on the disposition of contributed or revalued properties will be allocated first to the
partners who contributed the properties or who were partners at the time of revaluation, to the extent of their built-in gain or loss on those
properties for U.S. federal income tax purposes. The partners’ built-in gain or loss on contributed or revalued properties is the difference
between the partners’ proportionate share of the book value of those properties and the partners’ tax basis allocable to those properties at
the time of the contribution or revaluation. Any remaining gain or loss recognized by the Partnership on the disposition of contributed or
revalued properties, and any gain or loss recognized by the Partnership on the disposition of other properties, will be allocated among the
partners in accordance with their percentage interests in the Partnership.
CubeSmart’s share of any Partnership gain from the sale of inventory or other property held primarily for sale to
customers in the ordinary course of the Partnership’s trade or business will be treated as income from a prohibited transaction subject to a
100% tax. Income from a prohibited transaction may have an adverse effect on CubeSmart’s ability to satisfy the gross income tests for
REIT status. See “Requirements for Qualification — Gross Income Tests.” CubeSmart does not presently intend to acquire or hold, or to
allow any Partnership to acquire or hold, any property that is likely to be treated as inventory or property held primarily for sale to
customers in the ordinary course of CubeSmart’s, or the Partnership’s, trade or business.
Partnership Audit Rules. Under the Bipartisan Budget Act of 2015, a partnership itself may be liable for a tax
computed by reference to the hypothetical increase in partner-level taxes (including interest and penalties) resulting from an adjustment of
partnership tax items on audit, regardless of changes in the composition of the partners (or their relative ownership) between the year
under audit and the year of the adjustment. These rules also include an elective alternative method under which the additional taxes
resulting from the adjustment are assessed against the affected partners, subject to a higher rate of interest than otherwise would apply.
Although it is uncertain how these new rules will be implemented, it is possible that they could result in partnerships in which we directly
or indirectly invest being required to pay additional taxes, interest and penalties as a result of an audit adjustment, and we, as a direct or
indirect partner of those partnerships could be required to bear the economic burden of those taxes, interest and penalties even though we,
as a REIT, may not otherwise have been required to pay additional corporate-level taxes as a result of the related audit adjustment. The
changes created by these new rules are sweeping and, in many respects, dependent on the promulgation of future regulations or other
guidance by the U.S. Treasury. Investors are urged to consult with their tax advisors with respect to those changes and their potential
impact on their investment in our shares.
Taxation of Shareholders
Taxation of Taxable U.S. Shareholders
income tax purposes, is:
The term “U.S. shareholder” means a holder of CubeSmart common shares or preferred shares that, for U.S. federal
a citizen or individual resident of the United States;
a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized
under the laws of the United States, any of its states or the District of Columbia;
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
any trust if (1) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more
U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in place to be
treated as a U.S. person.
If a partnership, entity or arrangement treated as a partnership for U.S. federal income tax purposes holds CubeSmart
common shares or preferred shares, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status
of the partner and the activities of the partnership. If you are a partner in a partnership holding CubeSmart common shares or preferred
shares, you should consult your tax advisor regarding the consequences of the ownership and disposition of CubeSmart common shares or
preferred shares by the partnership.
Taxation of U.S. Shareholders on Distributions. As long as CubeSmart qualifies as a REIT, a taxable U.S. shareholder
will be required to take into account as ordinary income distributions made out of CubeSmart’s current or accumulated earnings and
profits that CubeSmart does not designate as capital gain dividends or retained long-term capital gain. However, for taxable years
beginning after December 31, 2017 and before January 1, 2026, generally individual shareholders are allowed to deduct 20% of the
aggregate amount of ordinary dividends distributed by us, subject to certain limitations. A U.S. shareholder will not qualify for the
dividends-received deduction generally available to corporations.
Dividends paid to a U.S. shareholder generally will not qualify for the preferential tax rate for “qualified dividend
income” (currently, a 20% maximum rate, also see the discussion below, “Taxation of Shareholders— Tax Rates Applicable to Individual
Shareholders under the TCJA”). Qualified dividend income generally includes dividends paid by domestic C corporations and certain
qualified foreign corporations to most noncorporate U.S. shareholders. Because a REIT is not generally subject to U.S. federal income tax
on the portion of its REIT taxable income distributed to its shareholders, CubeSmart’s dividends generally will not be eligible for the
preferential tax rate on qualified dividend income. As a result, CubeSmart’s ordinary REIT dividends will be taxed at the higher rate
applicable to ordinary income. The highest marginal individual income tax rate on ordinary income is 39.6% for tax years beginning on or
before December 31, 2017 and 37% for tax years beginning after that date (but see the discussion below “Taxation of Shareholders — Tax
Rates Applicable to Individual Shareholders under the TCJA” regarding the sunset of the 37% rate). However, the preferential tax rate for
qualified dividend income will apply to CubeSmart’s ordinary REIT dividends, if any, that are (i) attributable to dividends received by
CubeSmart from non-REIT corporations, such as our taxable REIT subsidiaries, and (ii) attributable to income upon which CubeSmart has
paid corporate income tax (e.g., to the extent that CubeSmart distributes less than 100% of CubeSmart’s taxable income). In general, to
qualify for the preferential tax rate on qualified dividend income, a U.S. shareholder must hold CubeSmart common shares or preferred
shares for more than 60 days during the 121-day period beginning on the date that is 60 days before the date on which the common shares
or preferred shares become ex-dividend.
With respect to common shares, CubeSmart may distribute taxable dividends that are payable partly in cash and partly in
CubeSmart common shares. Taxable U.S. shareholders receiving such dividends will be required to include the full amount of the
dividends as ordinary income to the extent of CubeSmart’s current and accumulated earnings and profits. However, for taxable years
beginning after December 31, 2017 and before January 1, 2026, generally individual shareholders are allowed to deduct 20% of the
aggregate amount of ordinary dividends distributed by us that are “qualified REIT dividends”, subject to certain limitations. Pursuant to
the Treasury regulations, in order for a dividend paid by a REIT to be eligible to be treated as a “qualified REIT dividend,” the shareholder
must meet two holding period-related requirements. First, the shareholder must hold the REIT shares for a minimum of 46 days during the
91-day period that begins 45 days before the date on which the REIT share becomes ex-dividend with respect to the dividend. Second, the
qualifying portion of the REIT dividend is reduced to the extent that the shareholder is under an obligation (whether pursuant to a short
sale or otherwise) to make related payments with respect to positions in substantially similar or related property. The 20% deduction does
not apply to REIT capital gain dividends or to REIT dividends that we designate as “qualified dividend income.” Like most of the other
changes made by the TCJA applicable to non-corporate taxpayers, the 20% deduction will expire on December 31, 2025 unless Congress
acts to extend it. Prospective investors should consult their tax advisors concerning these limitations on the ability to deduct all or a
portion of dividends received on shares of our common shares or preferred shares.
Any distribution CubeSmart declares in October, November, or December of any year that is payable to a U.S.
shareholder of record on a specified date in any of those months will be treated as paid by CubeSmart and received by the U.S. shareholder
on December 31 of the year, provided CubeSmart actually pays the distribution during January of the following calendar year.
Distributions to a U.S. shareholder which CubeSmart designates as capital gain dividends will generally be treated as
long-term capital gain, without regard to the period for which the U.S. shareholder has held its common shares or preferred shares. In
general, U.S. shareholders will be taxable on long-term capital gains at a current maximum rate of 20% (see the discussion below
“Taxation of Shareholders—Tax Rates Applicable to Individual Shareholders under the TCJA”), except that the portion of such gain that
is attributable to depreciation recapture will be taxable at the maximum rate of 25%. A corporate U.S. shareholder, however, may be
required to treat up to 20% of certain capital gain dividends as ordinary income.
Effective for distributions paid or treated as being paid in taxable years beginning after December 31, 2015, the
aggregate amount of dividends that CubeSmart may designate as “capital gain dividends” or “qualified dividend income” with respect to
any taxable year may not exceed the dividends paid by CubeSmart with respect to such taxable year, including dividends that are paid in
the following taxable year and treated as having been paid with respect to such taxable year by being (1) declared before CubeSmart
timely files its tax return for such taxable year and (2) paid with or before the first regular dividend payment after such declaration.
CubeSmart may elect to retain and pay income tax on the net long-term capital gain that CubeSmart receives in a taxable
year. In that case, a U.S. shareholder would be taxed on its proportionate share of CubeSmart’s undistributed long-term capital gain. The
U.S. shareholder would receive a credit or refund for its proportionate share of the tax CubeSmart paid. The U.S. shareholder would
increase the basis in its common shares or preferred shares by the amount of its proportionate share of CubeSmart’s undistributed long-
term capital gain, minus its share of the tax CubeSmart paid.
A U.S. shareholder will not incur tax on a distribution in excess of CubeSmart’s current and accumulated earnings and
profits if the distribution does not exceed the adjusted basis of the U.S. shareholder’s common shares or preferred shares. Instead, the
distribution will reduce the adjusted basis of the shares, and any amount in excess of both CubeSmart’s current and accumulated earnings
and profits and the adjusted basis will be treated as capital gain, long-term capital gain if the shares have been held for more than one year,
provided the shares are a capital asset in the hands of the U.S. shareholder.
Shareholders may not include in their individual income tax returns any of CubeSmart’s net operating losses or capital
losses. Instead, these losses are generally carried over by CubeSmart for potential offset against CubeSmart’s future income (subject to
certain limitation for net operating losses arising in tax years beginning after December 31, 2017, as modified by the CARES Act).
Taxable distributions from CubeSmart and gain from the disposition of common shares or preferred shares will not be treated as passive
activity income; and, therefore, shareholders generally will not be able to apply any “passive activity losses,” such as losses from certain
types of limited partnerships in which the shareholder is a limited partner, against such income. In addition, taxable distributions from
CubeSmart and gain from the disposition of common shares or preferred shares generally will be treated as investment income for
purposes of the investment interest limitations. Net capital gain from the disposition of our stock or capital gain dividends generally will be
excluded from investment income unless the shareholder elects to have the gain taxed at ordinary income rates. CubeSmart will notify
shareholders after the close of its taxable year as to the portions of the distributions attributable to that year that constitute ordinary
income, return of capital, and capital gain.
Taxation of U.S. Shareholders on the Disposition of Common and Preferred Shares
In general, a U.S. shareholder who is not a dealer in securities must treat any gain or loss realized upon a taxable
disposition of CubeSmart’s common or preferred shares as long-term capital gain or loss if the U.S. shareholder has held the shares for
more than one year, and otherwise as short-term capital gain or loss. In general, a U.S. shareholder will realize gain or loss in an amount
equal to the difference between the sum of the fair market value of any property and the amount of cash received in such disposition and
the U.S. shareholder’s adjusted tax basis. A U.S. shareholder’s adjusted tax basis generally will equal the U.S. shareholder’s acquisition
cost, increased by the excess of the U.S. shareholder’s allocable share of any retained capital gains, less the U.S. shareholder’s allocable
share of the tax paid by us on such retained capital gains and reduced by any returns of capital. However, a U.S. shareholder must treat any
loss upon a sale or exchange of common or preferred shares held by such shareholder for six months or less as a long-term capital loss to
the extent of capital gain dividends and any actual or deemed distributions from CubeSmart that such U.S. shareholder treats as long-term
capital gain. All or a portion of any loss that a U.S. shareholder realizes upon a taxable disposition of common or preferred shares may be
disallowed if the U.S. shareholder purchases other common shares or preferred shares within 30 days before or after the disposition.
If a U.S. shareholder recognizes a loss upon a subsequent disposition of CubeSmart shares in an amount that exceeds a
prescribed threshold, it is possible that the provisions of Treasury regulations involving “reportable transactions” could apply, with a
resulting requirement to separately disclose the loss generating transactions to the IRS. While these regulations are directed towards “tax
shelters,” they are written broadly, and apply to transactions that would not typically be considered tax shelters. Significant penalties apply
for failure to comply with these requirements. You should consult your tax advisor concerning any possible disclosure obligation with
respect to the receipt or disposition of CubeSmart shares, or transactions that might be undertaken directly or indirectly by us. Moreover,
you should be aware that CubeSmart and other participants in transactions involving CubeSmart (including our advisors) might be subject
to disclosure or other requirements pursuant to these regulations.
The tax-rate differential between capital gain and ordinary income for non-corporate taxpayers may be significant. A
taxpayer generally must hold a capital asset for more than one year for gain or loss derived from its sale or exchange to be treated as long-
term capital gain or loss. The highest marginal individual income tax rate is currently 39.6% for tax years beginning on or before
December 31, 2017 and 37% for tax years beginning after that date (but see the discussion below “Taxation of Shareholders—Tax Rates
Applicable to Individual Shareholders under the TCJA” regarding the sunset of the 37% rate). The maximum tax rate on long-term capital
gain applicable to U.S. shareholders taxed at individual rates is currently 20%. For additional information, see the discussion below
“Taxation of Shareholders—Tax Rates Applicable to Individual Shareholders under the TCJA.” The maximum tax rate on long-term
capital gain from the sale or exchange of “section 1250 property” (i.e., generally, depreciable real property) is 25% to the extent the gain
would have been treated as ordinary income if the property were “section 1245 property” (i.e., generally, depreciable personal property).
CubeSmart generally may designate whether a distribution CubeSmart designates as capital gain dividends (and any retained capital gain
that CubeSmart is deemed to distribute) is taxable to non-corporate shareholders at the current20% or 25% rate. The characterization of
income as capital gain or ordinary income may affect the deductibility of capital losses. A non-corporate taxpayer may deduct capital
losses not offset by capital gains against its ordinary income only up to a maximum of $3,000 annually. A non-corporate taxpayer may
carry unused capital losses forward indefinitely. A corporate taxpayer must pay tax on its net capital gain at corporate ordinary-income
rates. A corporate taxpayer may deduct capital losses only to the extent of capital gains, with unused losses carried back three years and
forward five years.
Redemption of Preferred Shares
Whenever we redeem any preferred shares, the treatment accorded to any redemption by us for cash (as distinguished
from a sale, exchange or other disposition) of our preferred shares to a U.S. shareholder of such preferred shares can only be determined
on the basis of the particular facts as to each holder at the time of redemption. In general, a U.S. shareholder of our preferred shares will
recognize capital gain or loss measured by the difference between the amount received by the holder of such shares upon the redemption
and such holder’s adjusted tax basis in the preferred shares redeemed (provided the preferred shares are held as a capital asset) if such
redemption (i) results in a “complete termination” of the holder’s interest in all classes of our shares under Section 302(b)(3) of the Code,
or (ii) is “not essentially equivalent to a dividend” with respect to the holder of the preferred shares under Section 302(b)(1) of the Code.
In applying these tests, there must be taken into account not only the preferred shares being redeemed, but also such holder’s ownership of
other classes and series of our shares and any options (including stock purchase rights) to acquire any of the foregoing. The U.S.
shareholder of our preferred shares also must take into account any such securities (including options) which are considered to be owned
by such holder by reason of the constructive ownership rules set forth in Sections 318 and 302(c) of the Code.
If the U.S. shareholder of preferred shares owns (actually or constructively) none of our voting shares, or owns an
insubstantial amount of our voting shares, based upon current law, it is probable that the redemption of preferred shares from such a holder
would be considered to be “not essentially equivalent to a dividend.” However, whether a distribution is “not essentially equivalent to a
dividend” depends on all of the facts and circumstances, and a U.S. shareholder of our preferred shares intending to rely on any of the tests
in this or the preceding paragraph at the time of redemption should consult its tax advisor to determine their application to its particular
situation. If the redemption does not meet any of the tests under Section 302 of the Code, then the redemption proceeds received from our
preferred shares will be treated as a distribution on our shares as described under “Taxation of U.S. Shareholders — Taxation of Taxable
U.S. Shareholders — Taxation of U.S. Shareholders on Distributions.” If the redemption of a holder’s preferred shares is taxed as a
dividend, the adjusted basis of such holder’s redeemed preferred shares will be transferred to any other shares held by the holder.
If the holder owns no other shares, under certain circumstances, such basis may be transferred to a related person, or it
may be lost entirely.
With respect to a redemption of our preferred shares that is treated as a distribution with respect to our shares, which is
not otherwise taxable as a dividend, the IRS has proposed Treasury regulations that would require any basis reduction associated with such
a redemption to be applied on a share-by-share basis which could result in taxable gain with respect to some shares, even though the
holder’s aggregate basis for the shares would be sufficient to absorb the entire amount of the redemption distribution (in excess of any
amount of such distribution treated as a dividend). Additionally, these proposed Treasury regulations would not permit the transfer of basis
in the redeemed shares of the preferred shares to the remaining shares held (directly or indirectly) by the redeemed holder. Instead, the
unrecovered basis in our preferred shares would be treated as a deferred loss to be recognized when certain conditions are satisfied. These
proposed Treasury regulations would be effective for transactions that occur after the date the regulations are published as final Treasury
regulations. There can, however, be no assurance as to whether, when, and in what particular form such proposed Treasury regulations will
ultimately be finalized.
Conversion of Our Preferred Shares into Common Shares.
Except as provided below, a U.S. shareholder generally will not recognize gain or loss upon the conversion of our
preferred shares into our common shares. Except as provided below, a U.S. shareholder’s basis and holding period in the common shares
received upon conversion generally will be the same as those of the converted preferred shares (but the basis will be reduced by the
portion of adjusted tax basis allocated to any fractional common share exchanged for cash). Any common shares received in a conversion
that is attributable to accumulated and unpaid dividends on the converted preferred shares will be treated as a distribution on our shares as
described above in “Taxation of U.S. Shareholders — Taxation of Taxable U.S. Shareholders — Taxation of U.S. Shareholders on
Distributions.” Cash received upon conversion in lieu of a fractional common share generally will be treated as a payment in a taxable
exchange for such fractional common share, and gain or loss will be recognized on the receipt of cash in an amount equal to the difference
between the amount of cash received and the adjusted tax basis allocable to the fractional common share deemed exchanged. This gain or
loss will be long-term capital gain or loss if the U.S. shareholder has held the preferred shares for more than one year. See “— Taxation of
U.S. Shareholders — Taxation of Taxable U.S. Shareholders — Taxation of U.S. Shareholders on the Disposition of Common and
Preferred Shares.” U.S. shareholders should consult with their tax advisors regarding the U.S. federal income tax consequences of any
transaction by which such holder exchanges common shares received on a conversion of preferred shares for cash or other property.
Tax Rates Applicable to Individual Shareholders under the TCJA
Long-term capital gains (i.e., capital gains with respect to assets held for more than one year) and “qualified dividends”
received by an individual generally are subject to federal income tax at a maximum rate of 20%. Short-term capital gains (i.e., capital gains
with respect to assets held for one year or less) generally are subject to federal income tax at ordinary income rates. Because we are not
generally subject to federal income tax on the portion of our REIT taxable income or capital gains distributed to our shareholders, our
dividends generally are not eligible for the 20% maximum tax rate on qualified dividends. Instead, our ordinary dividends generally are
taxed at the higher tax rates applicable to ordinary income, the maximum rate of which is 37% for tax years beginning after December 31,
2017 (the rate was 39.6% for tax years beginning before that date) and before January 1, 2026. However, for taxable years prior to 2026,
individual shareholders are generally allowed to deduct 20% of the aggregate amount of ordinary dividends distributed by us, subject to
certain limitations, which would reduce the maximum marginal effective tax rate for individuals on the receipt of such ordinary dividends
to 29.6%. The 20% maximum tax rate for long-term capital gains and qualified dividends generally applies to:
your long-term capital gains, if any, recognized on the disposition of our shares;
our distributions designated as long-term capital gain dividends (except to the extent attributable to real estate depreciation,
in which case such distributions are subject to a 25% tax rate to such extent);
our dividends attributable to dividends received by us from non-REIT corporations, such as taxable REIT subsidiaries; and
our dividends to the extent attributable to income upon which we have paid corporate income tax (e.g., to the extent that we
distribute less than 100% of our taxable income).
Medicare Tax on Investment Income
Certain U.S. shareholders and U.S. Holders (as defined below) who are individuals, estates or trusts and whose income
exceeds certain thresholds may be required to pay a 3.8% Medicare tax on “net investment income” which includes, among other things,
dividends on shares, interest on debt securities and capital gains from the sale or other disposition of shares or debt securities, subject to
certain exceptions. The current 20% deduction allowed by Section 199A of the Code, as added by the TCJA, with respect to ordinary
REIT dividends received by non-corporate taxpayers is allowed only for purposes of Chapter 1 of the Code and thus is apparently not
allowed as a deduction allocable to such dividends for purposes of determining the amount of net investment income subject to the 3.8%
Medicare tax, which is imposed under Chapter 2A of the Code. Prospective investors should consult their tax advisors regarding the
effect, if any, of this legislation on their ownership and disposition of our common shares, preferred shares or debt securities.
Information Reporting Requirements and Backup Withholding.
CubeSmart will report to its shareholders and to the IRS the amount of distributions CubeSmart pays during each
calendar year and the amount of tax it withholds, if any. A shareholder may be subject to backup withholding at a rate of up to 24% with
respect to distributions unless the holder:
is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact; or
provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise
complies with the applicable requirements of the backup withholding rules.
A shareholder who does not provide CubeSmart with its correct taxpayer identification number also may be subject to
penalties imposed by the IRS. In addition, CubeSmart may be required to withhold a portion of capital gain distributions to any
shareholders who fail to certify their non-foreign status to CubeSmart. Backup withholding is not an additional tax. Any amounts withheld
under the backup withholding rules may be allowed as a refund or a credit against the shareholder’s income tax liability, provided the
required information is timely furnished to the IRS.
Taxation of Tax-Exempt Shareholders
Tax-exempt entities, including qualified employee pension and profit sharing trusts and individual retirement accounts
and annuities, generally are exempt from U.S. federal income taxation. However, they are subject to taxation on their “unrelated business
taxable income.” While many investments in real estate generate unrelated business taxable income, the IRS has issued a ruling that
dividend distributions from a REIT to an exempt employee pension trust do not constitute unrelated business taxable income so long as the
exempt employee pension trust does not otherwise use the shares of the REIT in an unrelated trade or business of the pension trust. Based
on that ruling, amounts CubeSmart distributes to tax-exempt shareholders generally should not constitute unrelated business taxable
income. However, if a tax-exempt shareholder were to finance its acquisition of common shares or preferred shares with debt, a portion of
the income it received from CubeSmart would constitute unrelated business taxable income pursuant to the “debt-financed property” rules.
Furthermore, social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal
services plans that are exempt from taxation under special provisions of the U.S. federal income tax laws are subject to different unrelated
business taxable income rules, which generally will require them to characterize distributions they receive from CubeSmart as unrelated
business taxable income.
In certain circumstances, a qualified employee pension or profit-sharing trust that owns more than 10% of CubeSmart’s
shares of beneficial interest (by value) must treat a percentage of the dividends it receives from CubeSmart as unrelated business taxable
income. Such percentage is equal to the gross income CubeSmart derives from an unrelated trade or business, determined as if CubeSmart
were a pension trust, divided by its total gross income for the year in which it pays the dividends. This rule applies to a pension trust
holding more than 10% of CubeSmart shares only if:
the percentage of CubeSmart’s dividends which the tax-exempt trust must treat as unrelated business taxable income is
at least 5%;
CubeSmart is a “pension-held REIT,” that is, CubeSmart qualifies as a REIT by reason of the modification of the
rule requiring that no more than 50% of CubeSmart’s shares of beneficial interest be owned by five or fewer individuals
that allows the beneficiaries of the pension trust to be treated as holding CubeSmart’s shares in proportion to their
actuarial interests in the pension trust; and
either: (i) one pension trust owns more than 25% of the value of CubeSmart’s shares of beneficial interest; or (ii) one or
more pension trusts each individually holding more than 10% of the value of CubeSmart’s shares of beneficial interest
collectively owns more than 50% of the value of CubeSmart’s shares of beneficial interest.
owning more than 10% of the value of its shares, or CubeSmart from becoming a pension-held REIT.
Certain restrictions on ownership and transfer of CubeSmart’s shares should generally prevent a tax-exempt entity from
tax consequences of the acquisition, ownership and disposition of CubeSmart shares.
Tax-exempt U.S. shareholders are urged to consult their tax advisor regarding the U.S. federal, state, local and foreign
Taxation of Non-U.S. Shareholders
The term “non-U.S. shareholder” means a holder of CubeSmart common shares or preferred shares that is not a U.S.
shareholder or a partnership (or an entity treated as a partnership for U.S. federal income tax purposes). The rules governing U.S. federal
income taxation of non-U.S. shareholders are complex. This section is only a summary of such rules. We urge non-U.S. shareholders to
consult their own tax advisors to determine the impact of federal, state, local and foreign income tax laws on ownership of
common shares or preferred shares, including any reporting requirements.
Taxation of Distributions. A non-U.S. shareholder that receives a distribution which is not attributable to gain from
CubeSmart’s sale or exchange of a “United States real property interest” (“USRPI”) (discussed below) and that CubeSmart does not
designate a capital gain dividend or retained capital gain will be treated as receiving dividends to the extent that CubeSmart pays such
distribution out of CubeSmart’s current or accumulated earnings and profits.
A withholding tax equal to 30% of the gross amount of the distribution ordinarily will apply unless an applicable tax treaty reduces or
eliminates the tax. However, a non-U.S. shareholder generally will be subject to U.S. federal income tax at graduated rates on any
distribution treated as effectively connected with the non-U.S. shareholder’s conduct of a U.S. trade or business, in the same manner as
U.S. shareholders are taxed on distributions. A corporate non-U.S. shareholder may, in addition, be subject to the 30% branch profits tax
with respect to that distribution. CubeSmart plans to withhold U.S. income tax at the rate of 30% on the gross amount of any distribution
paid to a non-U.S. shareholder unless either:
a lower treaty rate applies and the non-U.S. shareholder files a properly completed IRS Form W-8BEN or W-8BEN-E
(or other applicable form) evidencing eligibility for that reduced rate with us; or
the non-U.S. shareholder files an IRS Form W-8ECI (or other applicable form) with CubeSmart claiming that the
distribution is effectively connected income.
A non-U.S. shareholder will not incur tax on a distribution in excess of CubeSmart’s current and accumulated earnings
and profits if the excess portion of such distribution does not exceed the adjusted basis of its common shares or preferred shares. Instead,
the excess portion of the distribution will reduce the adjusted basis of such shares. A non-U.S. shareholder will be subject to tax on a
distribution that exceeds both CubeSmart’s current and accumulated earnings and profits and the adjusted basis of its shares, if the non-
U.S. shareholder otherwise would be subject to tax on gain from the sale or disposition of common shares or preferred shares, as described
below. Because CubeSmart generally cannot determine at the time CubeSmart makes a distribution whether the distribution will exceed
CubeSmart’s current and accumulated earnings and profits, CubeSmart normally will withhold tax on the entire amount of any distribution
at the same rate as CubeSmart would withhold on a dividend. However, a non-U.S. shareholder may obtain a refund of amounts
CubeSmart withholds if CubeSmart later determines that a distribution in fact exceeded CubeSmart’s current and accumulated earnings
and profits.
CubeSmart may be required to withhold 15% (increased from 10% effective February 17, 2016) of any distribution that
exceeds CubeSmart’s current and accumulated earnings and profits. Consequently, although CubeSmart intends to withhold at a rate of
30% on the entire amount of any distribution, to the extent CubeSmart does not do so, CubeSmart may withhold at a rate of 15% on any
portion of a distribution not subject to withholding at a rate of 30%.
For any year in which CubeSmart qualifies as a REIT, except as discussed below (in “Taxation of Non-U.S.
Shareholders—Taxation of Disposition of Shares”) with respect to certain holders owning 10% or less of regularly traded classes of
shares, a non-U.S. shareholder will incur tax on distributions attributable to gain from CubeSmart’s sale or exchange of a United States
real property interest (a “USRPI”) under the Foreign Investment in Real Property Tax Act of 1980, or “FIRPTA.” A USRPI includes
certain interests in real property and shares in United States corporations at least 50% of whose assets consist of interests in real property.
Under FIRPTA, a non-U.S. shareholder is taxed on distributions attributable to gain from sales of USRPIs as if the gain were effectively
connected with the conduct of a U.S. business of the non-U.S. shareholder. A non-U.S. shareholder would be taxed on such a distribution
at the normal capital gain rates applicable to U.S. shareholders, subject to applicable alternative minimum tax and a special alternative
minimum tax in the case of a nonresident alien individual. A non-U.S. corporate shareholder not entitled to treaty relief or exemption also
may be subject to the 30% branch profits tax on such a distribution. CubeSmart must withhold 21% of any distribution that CubeSmart
could designate as a capital gain dividend. A non-U.S. shareholder may receive a credit against its tax liability for the amount CubeSmart
withholds.
Effective December 18, 2015, our shares will not be treated as a USRPI when held, directly or indirectly, by a qualified
shareholder and, therefore, FIRPTA will not apply to such shares. However, certain investors in a qualified shareholder that owns more
than 10% of our shares (directly or indirectly) that are not themselves qualified shareholders may be subject to FIRPTA withholding. A
“qualified shareholder” is a foreign entity that (1)(i) is eligible for the benefits of a comprehensive income tax treaty with the United States
that includes an exchange of information program and the principal class of interests of which is listed and regularly traded on one or more
recognized stock exchanges (as defined in such comprehensive income tax treaty), or (ii) is a foreign partnership that is created or
organized under foreign law as a limited partnership in a jurisdiction that has an agreement for the exchange of information with respect to
taxes with the United States and has a class of limited partnership units which is regularly traded on the New York Stock Exchange or
Nasdaq Stock Market and the value of such class of limited partnership units is greater than 50% of the value of all of the partnership units
of the foreign partnership, (2) is a qualified collective investment vehicle, and (3) maintains records on the identity of each person who, at
any time during the foreign person’s taxable year, holds directly 5% or more of the class of interests described in (1)(i) or (ii). A
“qualified collective investment vehicle” is a foreign person that (x) under the comprehensive income tax treaty described in (1)(i) or (ii)
would be eligible for a reduced rate of withholding with respect to dividends paid by a REIT even if such person owned more than 10% of
the REIT, (y) is a publicly traded partnership that is a withholding foreign partnership, and would be treated as a United States real
property holding corporation if it were a United States corporation, or (z) which is designated as a qualified collective investment vehicle
by the Secretary of the Treasury and is either (1) fiscally transparent or (2) required to include dividends in its gross income, but is entitled
to a deduction for distributions to its equity investors. Additionally, effective December 18, 2015, qualified foreign pension funds will not
be subject to FIRPTA withholding. The rules concerning qualified shareholders and qualified foreign pension funds are complex and
investors who believe they may be qualified shareholders or qualified foreign pension funds should consult with their own tax advisors to
find out if these rules are applicable to them.
Distributions attributable to gain from sales or exchanges by CubeSmart of USRPIs are treated as ordinary dividends
(not subject to the 21% withholding tax under FIRPTA) if the distribution is made to a non-U.S. shareholder with respect to any class of
shares which is “regularly traded” on an established securities market located in the United States and if the non-U.S. shareholder did not
own more than 5% of such class of shares at any time during the taxable year. Such distributions will generally be subject to a 30% U.S.
withholding tax (subject to reduction under applicable treaty) but a non-U.S. shareholder will not be required to report the distribution on a
U.S. tax return. In addition, the branch profits tax will not apply to such distributions.
Taxation of Disposition of Shares. A non-U.S. shareholder generally will not incur tax under FIRPTA with respect to
gain on a sale of common shares or preferred shares as long as CubeSmart is a “domestically-controlled REIT,” which means that at all
times non-U.S. persons hold, directly or indirectly, less than 50% in value of all outstanding CubeSmart shares.
CubeSmart cannot assure you that this test will be met. Further, even if CubeSmart is a domestically controlled REIT,
pursuant to “wash sale” rules under FIRPTA, a non-U.S. shareholder may incur tax under FIRPTA. The “wash sale” rule applies to the
extent such non-U.S. shareholder disposes of CubeSmart shares during the 30-day period preceding a dividend payment, and such non-
U.S. shareholder (or a person related to such non-U.S. shareholder) acquires or enters into a contract or option to acquire CubeSmart
common shares or preferred shares within 61 days of the 1st day of the 30 day period described above, and any portion of such dividend
payment would, but for the disposition, be treated as a USRPI capital gain to such non-U.S. shareholder, then such non-U.S. shareholder
shall be treated as having USRPI capital gain in an amount that, but for the disposition, would have been treated as USRPI capital gain.
In addition, a non-U.S. shareholder that owns, actually or constructively, 10% or less of the outstanding common shares
or preferred shares at all times during a specified testing period will not incur tax under FIRPTA on gain from a sale of such common
shares or preferred shares if such shares are “regularly traded” on an established securities market. Because CubeSmart’s common shares
and preferred shares are “regularly traded” on an established securities market, CubeSmart expects that a non-U.S. shareholder generally
will not incur tax under FIRPTA on gain from a sale of common shares or preferred shares unless it owns or has owned more than 10% of
such common shares or preferred shares at any time during the five year period to such sale. Any gain subject to tax under FIRPTA will be
treated in the same manner as it would be in the hands of U.S. shareholders, subject to alternative minimum tax, but under a special
alternative minimum tax in the case of nonresident alien individuals, and the purchaser of the shares could be required to withhold 10% of
the purchase price and remit such amount to the IRS.
A non-U.S. shareholder generally will incur tax on gain not subject to FIRPTA if:
the gain is effectively connected with the conduct of the non-U.S. shareholder’s U.S. trade or business, in which case the
non-U.S. shareholder will be subject to the same treatment as U.S. shareholders with respect to the gain; or
the non-U.S. shareholder is a nonresident alien individual who was present in the U.S. for 183 days or more during the
taxable year and has a “tax home” in the United States, in which case the non-U.S. shareholder will incur a 30% tax on
capital gains.
Redemptions of Our Preferred Shares. Whenever we redeem any preferred shares, the treatment accorded to any
redemption by us for cash (as distinguished from a sale, exchange or other disposition) of our preferred shares to a non-U.S. shareholder of
such preferred shares can only be determined on the basis of the particular facts as to each holder at the time of redemption. In general, a
non-U.S. shareholder of our preferred shares will recognize capital gain or loss measured by the difference between the amount received
by the holder of such shares upon the redemption and such holder’s adjusted tax basis in the preferred shares redeemed (provided the
preferred shares are held as a capital asset) if such redemption (i) results in a “complete termination” of the holder’s interest in all classes
of our shares under Section 302(b)(3) of the Code, or (ii) is “not essentially equivalent to a dividend” with respect to the holder of the
preferred shares under Section 302(b)(1) of the Code. In applying these tests, there must be taken into account not only the preferred
shares being redeemed, but also such holder’s ownership of other classes and series of our shares and any options (including stock
purchase rights) to acquire any of the foregoing. The non-U.S. shareholder of our preferred shares also must take into account any such
securities (including options) which are considered to be owned by such holder by reason of the constructive ownership rules set forth in
Sections 318 and 302(c) of the Code.
If the non-U.S. shareholder of preferred shares owns (actually or constructively) none of our voting shares, or owns an
insubstantial amount of our voting shares, based upon current law, it is probable that the redemption of preferred shares from such a holder
would be considered to be “not essentially equivalent to a dividend.” However, whether a distribution is “not essentially equivalent to a
dividend” depends on all of the facts and circumstances, and a non-U.S. shareholder of our preferred shares intending to rely on any of the
tests in this or the preceding paragraph at the time of redemption should consult its tax advisor to determine their application to its
particular situation. If the redemption does not meet any of the tests under Section 302 of the Code, then the redemption proceeds received
from our preferred shares will be treated as a distribution on our shares as described under “Taxation of Shareholders — Taxation of Non-
U.S. Shareholders — Taxation of Distributions.”
If the redemption of a holder’s preferred shares is taxed as a dividend, the adjusted basis of such holder’s redeemed
preferred shares will be transferred to any other shares held by the holder. If the holder owns no other shares, under certain circumstances,
such basis may be transferred to a related person, or it may be lost entirely.
With respect to a redemption of our preferred shares that is treated as a distribution with respect to our shares, which is
not otherwise taxable as a dividend, the IRS has proposed Treasury regulations that would require any basis reduction associated with such
a redemption to be applied on a share-by-share basis which could result in taxable gain with respect to some shares, even though the
holder’s aggregate basis for the shares would be sufficient to absorb the entire amount of the redemption distribution (in excess of any
amount of such distribution treated as a dividend). Additionally, these proposed Treasury regulations would not permit the transfer of basis
in the redeemed shares of the preferred shares to the remaining shares held (directly or indirectly) by the redeemed holder. Instead, the
unrecovered basis in our preferred shares would be treated as a deferred loss to be recognized when certain conditions are satisfied. These
proposed Treasury regulations would be effective for transactions that occur after the date the regulations are published as final Treasury
regulations. There can, however, be no assurance as to whether, when, and in what particular form such proposed Treasury regulations will
ultimately be finalized.
Conversion of Our Preferred Shares into Common Shares. Except as provided below, a non-U.S. shareholder generally
will not recognize gain or loss upon the conversion of our preferred shares into our common shares, provided our preferred shares do not
constitute a USRPI. Even if our preferred shares do constitute a USRPI, provided our common shares also constitute a USRPI, a non-U.S.
shareholder generally will not recognize gain or loss upon a conversion of our preferred shares into our common shares provided certain
reporting requirements are satisfied. Except as provided below, a non-U.S. shareholder’s basis and holding period in the common shares
received upon conversion will be the same as those of the converted preferred shares (but the basis will be reduced by the portion of
adjusted tax basis allocated to any fractional common share exchanged for cash). Any common shares received in a conversion that are
attributable to accumulated and unpaid dividends on the converted preferred shares will be treated as a distribution on our shares as
described under “— Taxation of Shareholders — Taxation of Non-U.S. Shareholders — Taxation of Distributions.” Cash received upon
conversion in lieu of a fractional common share generally will be treated as a payment in a taxable exchange for such fractional common
share as described under “— Taxation of Shareholders — Taxation of Non-U.S. Shareholders — Taxation of Disposition of Shares.” Non-
U.S. shareholders should consult with their tax advisor regarding the U.S. federal income tax consequences of any transaction by which
such holder exchanges common shares received on a conversion of preferred shares for cash or other property.
Information Reporting and Backup Withholding Applicable to non-U.S. Shareholders
CubeSmart must report annually to the IRS and to each non-U.S. shareholder the amount of dividends paid to such
holder and the tax withheld with respect to such dividends, regardless of whether withholding was required. Copies of the information
returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the non-U.S.
shareholder resides under the provisions of an applicable income tax treaty.
Payments of dividends or of proceeds from the disposition of shares made to a non-U.S. shareholder may be subject to
information reporting and backup withholding unless such holder establishes an exemption, for example, by properly certifying its non-
United States status on a properly completed IRS Form W-8 BEN or W-8BEN-E or another appropriate version of IRS Form W-8.
Notwithstanding the foregoing, backup withholding may apply if either CubeSmart or its paying agent has actual knowledge, or reason to
know, that a non-U.S. shareholder is a United States person.
as a refund or a credit against the shareholder’s income tax liability, provided the required information is timely furnished to the IRS.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed
Additional Withholding Requirements under “FATCA”
Under Sections 1471 through 1474 of the Code (such Sections commonly referred to as “FATCA”), payments of
dividends to a non-U.S. shareholder will be subject to 30% withholding tax if the non-U.S. shareholder fails to provide the withholding
agent with documentation sufficient to show that it is compliant with the FATCA or otherwise exempt from withholding under FATCA.
Generally, such documentation is provided on an executed IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable. If a dividend
payment is both subject to withholding under FATCA and subject to withholding tax discussed above, the withholding under FATCA may
be credited against, and therefore reduce, such other withholding tax. Based upon proposed Treasury regulations, which may be relied
upon by taxpayers until the final Treasury regulations are issued, the FATCA withholding that was to be effective on January 1, 2019 with
respect to payments of the gross proceeds no longer applies. Non-U.S. shareholders should consult their tax advisors to determine the
applicability of this legislation in light of their individual circumstances.
Legislative or Other Actions Affecting REITs
The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative
process and by the IRS and the U.S. Treasury Department. No assurance can be given as to whether, when, or in what form, the U.S.
federal income tax laws applicable to CubeSmart and its shareholders may be enacted. Changes to the federal tax laws and interpretations
of U.S. federal tax laws could adversely affect an investment in CubeSmart shares.
Taxation of Holders of Debt Securities Offered by the Operating Partnership
This section describes the material U.S. federal income tax consequences of owning the debt securities that the
Operating Partnership may offer. This summary is for general information only and is not tax advice. The tax consequences of owning any
particular issue of debt securities will be discussed in the applicable prospectus.
U.S. federal income tax purposes:
As used herein, a “U.S. Holder” means a beneficial owner of debt securities of the Operating Partnership, who is, for
a citizen or individual resident of the United States,
a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or
under the laws of the United States, or any of its states, or the District of Columbia,
an estate the income of which is subject to U.S. federal income taxation regardless of its source, or
any trust if (1) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more
U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in place to be
treated as a U.S. person.
If a partnership holds debt securities, the tax treatment of a partner will generally depend upon the status of the partner
and the activities of the partnership. If you are a partner of a partnership holding debt securities of the Operating Partnership, you should
consult your tax advisor regarding the consequences of the ownership and disposition of debt securities by the partnership.
Pursuant to the TCJA, for taxable years beginning after December 31, 2017 (and for taxable years beginning after
December 31, 2018 for instruments issued with original issue discount (“OID”)), an accrual method taxpayer that reports revenues on an
applicable financial statement generally must recognize income for U.S. federal income tax purposes no later than the taxable year in
which such income is taken into account as revenue in an applicable financial statement of the taxpayer. To the extent this rule is
inconsistent with the rules described in the subsequent discussion, this rule supersedes such discussion. Thus, this rule could potentially
require such a taxpayer to recognize income for U.S. federal income tax purposes with respect to the debt securities prior to the time such
income would be recognized pursuant to the rules described in the subsequent discussion. The Treasury Department released final
Treasury regulations that exclude from this rule any item of gross income for which a taxpayer uses a special method of accounting
required by certain sections of the Internal Revenue Code, including income subject to the timing rules for OID and de minimis OID,
income under the contingent payment debt instrument rules, income under the variable rate debt instrument rules,
and market discount (including de minimis market discount). The final Treasury regulations are generally applicable for tax years
beginning on or after January 1, 2021. Taxpayers may choose to apply the final regulations, in their entirety and in a consistent manner, to
tax years beginning before the effective date (December 30, 2020). You should consult your tax advisors regarding the potential
applicability of these rules to your investment in the debt securities.
Taxation of Taxable U.S. Holders
that it is paid or accrued, in accordance with the U.S. Holder’s method of accounting for U.S. federal income tax purposes.
Interest. The stated interest on debt securities generally will be taxable to a U.S. Holder as ordinary income at the time
Original Issue Discount. If you own debt securities issued with OID, you will be subject to special tax accounting rules,
as described in greater detail below. In that case, you should be aware that you generally must include OID in gross income in advance of
the receipt of cash attributable to that income. However, you generally will not be required to include separately in income cash payments
received on the debt securities, even if denominated as interest, to the extent those payments do not constitute “qualified stated interest,” as
defined below. If we determine that a particular debt security will be an OID debt security, we will disclose that determination in the
prospectus relating to those debt securities.
A debt security with an “issue price” that is less than the “stated redemption price at maturity” (the sum of all payments
to be made on the debt security other than “qualified stated interest”) generally will be issued with OID if that difference is at least 0.25%
of the stated redemption price at maturity multiplied by the number of complete years to maturity. The “issue price” of each debt security
in a particular offering will be the first price at which a substantial amount of that particular offering is sold to the public. The term
“qualified stated interest” means stated interest that is unconditionally payable in cash or in property, other than debt instruments of the
issuer, and the interest to be paid meets all of the following conditions:
it is payable at least once per year;
it is payable over the entire term of the debt security; and
it is payable at a single fixed rate or, subject to certain conditions, based on one or more interest indices.
disclose that determination in the prospectus relating to those debt securities.
If we determine that particular debt securities of a series will bear interest that is not qualified stated interest, we will
If you own a debt security issued with “de minimis” OID, which is discount that is not OID because it is less than 0.25%
of the stated redemption price at maturity multiplied by the number of complete years to maturity, you generally must include the de
minimis OID in income at the time principal payments on the debt securities are made in proportion to the amount paid. Any amount of de
minimis OID that you have included in income will be treated as capital gain.
Certain of the debt securities may contain provisions permitting them to be redeemed prior to their stated maturity at our
option and/or at your option. OID debt securities containing those features may be subject to rules that differ from the general
rules discussed herein. If you are considering the purchase of OID debt securities with those features, you should carefully examine the
applicable prospectus and should consult your own tax advisor with respect to those features since the tax consequences to you with
respect to OID will depend, in part, on the particular terms and features of the debt securities.
If you own OID debt securities with a maturity upon issuance of more than one year you generally must include OID in
income in advance of the receipt of some or all of the related cash payments using the “constant yield method” described in the following
paragraphs. This method takes into account the compounding of interest.
The amount of OID that you must include in income if you are the initial United States holder of an OID debt security is
the sum of the “daily portions” of OID with respect to the debt security for each day during the taxable year or portion of the taxable year
in which you held that debt security (“accrued OID”). The daily portion is determined by allocating to each day in any “accrual period” a
pro rata portion of the OID allocable to that accrual period. The “accrual period” for an OID debt security may be of any length and may
vary in length over the term of the debt security, provided that each accrual period is no longer than one year and each scheduled payment
of principal or interest occurs on the first day or the final day of an accrual period. The amount of OID allocable to any accrual period is an
amount equal to the excess, if any, of:
the debt security’s “adjusted issue price” at the beginning of the accrual period multiplied by its yield to maturity,
determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the
accrual period, over
the aggregate of all qualified stated interest allocable to the accrual period.
OID allocable to a final accrual period is the difference between the amount payable at maturity, other than a payment of
qualified stated interest, and the adjusted issue price at the beginning of the final accrual period. Special rules will apply for calculating
OID for an initial short accrual period. The “adjusted issue price” of a debt security at the beginning of any accrual period is equal to its
issue price increased by the accrued OID for each prior accrual period, determined without regard to the amortization of any acquisition or
bond premium, as described below, and reduced by any payments made on the debt security (other than qualified stated interest) on or
before the first day of the accrual period. Under these rules, you will generally have to include in income increasingly greater amounts of
OID in successive accrual periods. We are required to provide information returns stating the amount of OID accrued on debt securities
held of record by persons other than corporations and other exempt holders.
Floating rate debt securities are subject to special OID rules. In the case of an OID debt security that is a floating rate
debt security, both the “yield to maturity” and “qualified stated interest” will be determined solely for purposes of calculating the accrual
of OID as though the debt security will bear interest in all periods at a fixed rate generally equal to the rate that would be applicable to
interest payments on the debt security on its date of issue or, in the case of certain floating rate debt securities, the rate that reflects the
yield to maturity that is reasonably expected for the debt security. Additional rules may apply if either:
the interest on a floating rate debt security is based on more than one interest index; or
the principal amount of the debt security is indexed in any manner.
This discussion does not address the tax rules applicable to debt securities with an indexed principal amount. If you are
considering the purchase of floating rate OID debt securities or securities with indexed principal amounts, you should carefully examine
the prospectus relating to those debt securities, and should consult your own tax advisor regarding the U.S. federal income tax
consequences to you of holding and disposing of those debt securities.
You may elect to treat all interest on any debt securities as OID and calculate the amount includible in gross income
under the constant yield method described above. For purposes of this election, interest includes stated interest, acquisition discount, OID,
de minimis OID, market discount, de minimis market discount and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium. You must make this election for the taxable year in which you acquired the debt security, and you may not revoke
the election without the consent of the IRS. You should consult with your own tax advisor about this election.
Market Discount. If you purchase debt securities, other than OID debt securities, after original issuance for an amount
that is less than their stated redemption price at maturity, or, in the case of OID debt securities, their adjusted issue price, the amount of the
difference will be treated as “market discount” for U.S. federal income tax purposes, unless that difference is less than a specified de
minimis amount. Under the market discount rules, you will be required to treat any principal payment on, or any gain on the sale,
exchange, retirement or other disposition of, the debt securities as ordinary income to the extent of the market discount that you have not
previously included in income and are treated as having accrued on the debt securities at the time of their payment or disposition. In
addition, you may be required to defer, until the maturity of the debt securities or their earlier disposition in a taxable transaction, the
deduction of all or a portion of the interest expense on any indebtedness attributable to the debt securities. You may elect, on a debt
security-by-debt security basis, to deduct the deferred interest expense in a tax year prior to the year of disposition. You should consult
your own tax advisor before making this election.
Any market discount will be considered to accrue ratably during the period from the date of acquisition to the maturity
date of the debt securities, unless you elect to accrue on a constant interest method. You may elect to include market discount in income
currently as it accrues, on either a ratable or constant interest method, in which case the rule described above regarding deferral of interest
deductions will not apply. Your election to include market discount in income currently, once made, applies to all market discount
obligations acquired by you on or after the first taxable year to which your election applies and may not be revoked without the consent of
the IRS. You should consult your own tax advisor before making this election.
Acquisition Premium and Amortizable Bond Premium. If you purchase OID debt securities for an amount that is
greater than their adjusted issue price but equal to or less than the sum of all amounts payable on the debt securities after the purchase date
other than payments of qualified stated interest, you will be considered to have purchased those debt securities at an “acquisition
premium.” Under the acquisition premium rules, the amount of OID that you must include in gross income with respect to those debt
securities for any taxable year will be reduced by the portion of the acquisition premium properly allocable to that year.
If you purchase debt securities (including OID debt securities) for an amount in excess of the sum of all amounts payable
on those debt securities after the purchase date other than qualified stated interest, you will be considered to have purchased those debt
securities at a “premium” and, if they are OID debt securities, you will not be required to include any OID in income. You generally may
elect to amortize the premium over the remaining term of those debt securities on a constant yield method as an offset to interest when
includible in income under your regular accounting method.
In the case of debt securities that provide for alternative payment schedules, bond premium is calculated by generally
assuming that (a) you will exercise or not exercise options in a manner that maximizes your yield, and (b) we will exercise or not exercise
options in a manner that minimizes your yield (except that we will be assumed to exercise call options in a manner that maximizes your
yield). If you do not elect to amortize bond premium, that premium will decrease the gain or increase the loss you would otherwise
recognize on disposition of the debt security. Your election to amortize premium on a constant yield method will also apply to all debt
obligations held or subsequently acquired by you on or after the first day of the first taxable year to which the election applies. You may
not revoke the election without the consent of the IRS. You should consult your own tax advisor before making this election.
Sale, Exchange and Retirement of Debt Securities. A U.S. Holder of debt securities will recognize gain or loss upon
the sale, exchange, retirement, redemption or other taxable disposition of such debt securities in an amount equal to the difference
between:
the amount of cash and the fair market value of other property received in exchange for such debt securities, other than
amounts attributable to accrued but unpaid qualified stated interest, which will be subject to tax as ordinary income to
the extent not previously included in income; and
the U.S. Holder’s adjusted tax basis in such debt securities.
A U.S. Holder’s adjusted tax basis in a debt security generally will equal the cost of the debt security to such holder
(A) increased by the amount of OID or accrued market discount (if any) previously included in income by such holder and (B) decreased
by the amount of (1) any payments other than qualified stated interest payments and (2) any amortizable bond premium taken by the
holder.
Any gain or loss recognized will generally be capital gain or loss, and such capital gain or loss will generally be long-
term capital gain or loss if the debt security has been held by the U.S. Holder for more than one year. Long-term capital gain for non-
corporate taxpayers is subject to reduced rates of U.S. federal income taxation (currently, a 20% maximum federal rate, also see the
discussion above in “Taxation of Shareholders—Tax Rates Applicable to Individual Shareholders under the TCJA” for a more detailed
discussion on tax rates for individuals)). The deductibility of capital losses is subject to certain limitations.
If a U.S. Holder recognizes a loss upon a subsequent disposition of debt securities in an amount that exceeds a
prescribed threshold, it is possible that the provisions of Treasury regulations involving “reportable transactions” could apply, with a
resulting requirement to separately disclose the loss generating transactions to the IRS. While these regulations are directed towards “tax
shelters,” they are written broadly, and apply to transactions that would not typically be considered tax shelters. Significant penalties apply
for failure to comply with these requirements. You should consult your tax advisor concerning any possible disclosure obligation with
respect to the receipt or disposition of debt securities, or transactions that might be undertaken directly or indirectly by us. Moreover, you
should be aware that we and other participants in transactions involving us (including our advisors) might be subject to disclosure or other
requirements pursuant to these regulations.
Medicare Tax on Investment Income
Certain U.S. Shareholders and U.S. Holders who are individuals, estates or trusts and whose income exceeds certain
thresholds may be required to pay a 3.8% Medicare tax on “net investment income” which includes, among other things, dividends on
shares, interest on debt securities and capital gains from the sale or other disposition of shares or debt securities, subject to certain
exceptions. Prospective investors should consult their tax advisors regarding the effect, if any, of this legislation on their ownership and
disposition of our common shares, preferred shares or debt securities.
Taxation of Tax-Exempt Holders of Debt Securities
Assuming the debt security is debt for tax purposes, interest income accrued on the debt security should not constitute
unrelated business taxable income to a tax-exempt holder. As a result, a tax-exempt holder generally should not be subject to U.S. federal
income tax on the interest income accruing on debt securities of the Operating Partnership. Similarly, any gain recognized by the tax-
exempt holder in connection with a sale of the debt security generally should not be unrelated business taxable income. However, if a tax-
exempt holder were to finance its acquisition of the debt security with debt, a portion of the interest income and gain attributable to the
debt security would constitute unrelated business taxable income pursuant to the “debt-financed property” rules. Tax-exempt holders
should consult their own tax advisors to determine the potential tax consequences of an investment in debt securities of the Operating
Partnership.
Taxation of Non-U.S. Holders of Debt Securities
The term “non-U.S. Holder” means a holder of debt securities of the Operating Partnership that is not a U.S. Holder or a
partnership (or an entity treated as a partnership for U.S. federal income tax purposes). The rules governing U.S. federal income taxation
of non-U.S. Holders are complex. This section is only a summary of such rules. We urge non-U.S. Holders to consult their own tax
advisors to determine the impact of federal, state, local and foreign income tax laws on ownership of debt securities, including any
reporting requirements.
Interest. Subject to the discussions of backup withholding and “FATCA” below, interest (including OID) paid to a non-
U.S. Holder of debt securities will not be subject to U.S. federal income or withholding tax under the “portfolio interest exemption,”
provided that:
interest paid on debt securities is not effectively connected with a non-U.S. Holder’s conduct of a trade or business in the
United States;
the non-U.S. Holder does not actually or constructively own 10% or more of the capital or profits interest in the
Operating Partnership;
the non-U.S. Holder is not
a controlled foreign corporation with respect to which the Operating Partnership is a “related person” within the
meaning of Section 864(d) of the Code; or
a bank that receives such interest on an extension of credit made pursuant to a loan agreement entered into in
the ordinary course of its trade or business; and
the beneficial owner of debt securities provides a certification, which is generally made on an IRS Form W-8BEN of W-
8BEN-E or other applicable form or a suitable substitute form and signed under penalties of perjury, that it is not a
United States person.
A payment of interest (including OID) to a non-U.S. Holder that does not qualify for the portfolio interest exemption and
that is not effectively connected to a United States trade or business will be subject to United States federal withholding tax at a rate of
30%, unless a United States income tax treaty applies to reduce or eliminate withholding.
A non-U.S. Holder will generally be subject to tax in the same manner as a U.S. Holder with respect to payments of
interest (including OID) if such payments are effectively connected with the conduct of a trade or business by the non-U.S. Holder in the
United States and, if an applicable tax treaty provides, such gain is attributable to a United States permanent establishment maintained by
the non-U.S. Holder. In some circumstances, such effectively connected income received by a non-U.S. Holder which is a corporation may
be subject to an additional “branch profits tax” at a 30% base rate or, if applicable, a lower treaty rate.
To claim the benefit of a lower treaty rate or to claim exemption from withholding because the income is effectively
connected with a United States trade or business, the non-U.S. Holder must provide a properly executed IRS Form W-8BEN or W-8BEN-
E or IRS Form W-8ECI or other applicable form, or a suitable substitute form, as applicable, prior to the payment of interest. Such
certificate must contain, among other information, the name and address of the non-U.S. Holder as well as applicable U.S. and foreign tax
identification numbers.
provide different rules.
Non-U.S. Holders are urged to consult their own tax advisors regarding applicable income tax treaties, which may
Sale or Retirement of Debt Securities. Subject to the discussions of backup withholding and “FATCA” below, a non-
U.S. Holder generally will not be subject to U.S. federal income tax or withholding tax on gain realized on the sale, exchange or
redemption of debt securities unless:
the non-U.S. shareholder is a nonresident alien individual who was present in the U.S. for 183 days or more during the
taxable year and has a “tax home” in the United States, in which case the non-U.S. shareholder will incur a 30% tax on
capital gains; or
the gain is effectively connected with the conduct of a trade or business of the non-U.S. Holder in the United States and,
if an applicable tax treaty so provides, such gain is attributable to a United States permanent establishment maintained by
such holder.
Except to the extent that an applicable tax treaty provides otherwise, a non-U.S. Holder will generally be subject to tax in
the same manner as a U.S. Holder with respect to gain realized on the sale, exchange or redemption of debt securities if such gain is
effectively connected with the conduct of a trade or business by the non-U.S. Holder in the United States and, if an applicable tax treaty
provides, such gain is attributable to a United States permanent establishment maintained by the non-U.S. Holder. In certain
circumstances, a non-U.S. Holder that is a corporation will be subject to an additional “branch profits tax” at a 30% rate or, if applicable, a
lower treaty rate on such income.
securities beneficially owned by you at the time of your death, provided that any payment to you on the debt securities, including OID,
U.S. Federal Estate Tax. If you are an individual, your estate will not be subject to U.S. federal estate tax on the debt
would be eligible for exemption from the 30% U.S. federal withholding tax under the “portfolio interest exemption” described above,
without regard to the certification requirement.
Information Reporting and Backup Withholding Applicable to Holders of Debt Securities
U.S. Holders
Certain U.S. Holders may be subject to information reporting requirements on payments of principal and interest
(including OID) on debt securities and payments of the proceeds of the sale, exchange, or redemption of debt securities, and backup
withholding, currently imposed at a rate of 24%, may apply to such payment if the U.S. Holder:
fails to furnish an accurate taxpayer identification number, or TIN, to the payor in the manner required;
is notified by the IRS that it has failed to properly report payments of interest or dividends; or
under certain circumstances, fails to certify, under penalties of perjury, that it has furnished a correct TIN and that it has
not been notified by the IRS that it is subject to backup withholding.
Non-U.S. Holders
A non-U.S. Holder is generally not subject to backup withholding with respect to payments of interest (including OID)
on debt securities if it certifies as to its status as a non-U.S. Holder under penalties of perjury or if it otherwise establishes an exemption,
provided that neither we nor our paying agent has actual knowledge or reason to know that the non-U.S. Holder is a United States person
or that the conditions of any other exemptions are not, in fact, satisfied. Information reporting requirements, however, will apply to
payments of interest (including OID) to non-U.S. Holders where such interest is subject to withholding or exempt from United States
withholding tax pursuant to a tax treaty. Copies of these information returns may also be made available under the provisions of a specific
treaty or agreement to the tax authorities of the country in which the non-U.S. Holder resides.
The payment of the proceeds from the disposition of debt securities to or through the United States office of any broker,
United States or foreign, will be subject to information reporting and possible backup withholding unless the owner certifies as to its non-
United States status under penalties of perjury or otherwise establishes an exemption, provided that the broker does not have actual
knowledge or reason to know that the non-U.S. Holder is a United States person or that the conditions of any other exemption are not, in
fact, satisfied.
The payment of the proceeds from the disposition of debt securities to or through a non-United States office of a non-
United States broker that is not a “United States related person” generally will not be subject to information reporting or backup
withholding. For this purpose, a “United States related person” is:
a controlled foreign corporation for U.S. federal income tax purposes;
a foreign person 50% or more of whose gross income from all sources for the three-year period ending with the close of
its taxable year preceding the payment, or for such part of the period that the broker has been in existence, is derived
from activities that are effectively connected with the conduct of a United States trade or business; or
a foreign partnership that at any time during the partnership’s taxable year is either engaged in the conduct of a trade or
business in the United States or of which 50% or more of its income or capital interests are held by United States
persons.
In the case of the payment of proceeds from the disposition of debt securities to or through a non-United States office of
a broker that is either a United States person or a United States related person, the payment may be subject to information reporting unless
the broker has documentary evidence in its files that the owner is a non-U.S. Holder and the broker has no knowledge or reason to know to
the contrary. Backup withholding will not apply to payments made through foreign offices of a broker that is a United States person or a
United States related person, absent actual knowledge that the payee is a United States person.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment
to a Holder will be allowed as a refund or a credit against such Holder’s U.S. federal income tax liability, provided that the requisite
procedures are followed.
withholding and the procedure for obtaining such an exemption, if applicable.
Holders of debt securities are urged to consult their tax advisors regarding their qualification for exemption from backup
FATCA Withholding
Under Sections 1471 through 1474 of the Code (such Sections commonly referred to as “FATCA”), payments of interest
to a non-U.S. Holder will be subject to a 30% withholding tax if the non-U.S. Holder fails to provide the withholding agent with
documentation sufficient to show that it is compliant with FATCA. Generally such documentation is provided on an executed IRS Form
W-8BEN or IRS Form W-8BEN-E, as applicable. If interest is subject to the 30% tax under FATCA, it will not be subject to the 30% tax
described above under “Taxation of Non-U.S. Shareholders” and “Taxation of Non-U.S. Holders of Debt Securities.” Based upon
proposed Treasury regulations, which may be relied upon by taxpayers until the final Treasury regulations are issued, the FATCA
withholding that was to be effective on January 1, 2019 with respect to payments of the gross proceeds no longer applies. Prospective
investors should consult their tax advisors regarding the possible implications of this legislation on their investment in common shares or
preferred shares of CubeSmart or debt securities of the Operating Partnership.
CORPORATE OFFICERS
Christopher P. Marr
President & Chief Executive Officer American Stock Transfer &
CORPORATE INFORMATION
Transfer Agent
Investor Relations
5 Old Lancaster Road
Trust Co., LLC
Operations Center
6201 15th Avenue
Brooklyn, NY 11219
877.237.6885
Stock Listing
CubeSmart trades on the New
York Stock Exchange under the
symbol CUBE
Malvern, PA 19355
610.535.5000
Form 10-K
The Annual Report on Form
10-K filed with the Securities
and Exchange Commission is
available to shareholders
without charge upon
written request to:
Annual Meeting
The annual meeting of
shareholders will be held at
5 Old Lancaster Road
Malvern, PA 19355
Investor Relations
5 Old Lancaster Road
Malvern, PA 19355
610.535.5000
on May 11, 2021 at 8:00 A.M.
Internet
Eastern Time
Corporate Headquarters
5 Old Lancaster Road
Malvern, PA 19355
Financial statements and other
information are available
electronically on CubeSmart's
website at
www.cubesmart.com
BOARD OF TRUSTEES
Marianne M. Keler
Chair of the Board
Partner,
Keler & Kershow, PLLC
Timothy M. Martin
Chief Financial Officer
Christopher P. Marr
President & Chief Executive Officer,
CubeSmart
Jeffrey P. Foster
Chief Legal Officer & Secretary
Joel D. Keaton
Chief Operating Officer
Piero Bussani
Chief Legal Officer &
Global Head – Legal and Risk,
ReVantage Corporate Services
Dorothy Dowling
Chief Marketing Officer &
Senior Vice President of Sales,
BWH Hotel Group
John W. Fain
Senior Vice President,
Sales and Marketing (retired),
UPS Freight
John F. Remondi
President, Chief Executive Officer
& Director,
Navient
Jeffrey F. Rogatz
Managing Director,
Robert W. Baird & Co.
Deborah R. Salzberg
Partner,
RMS Investment Group
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, the Company has 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, 2020, 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 Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. 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 the Company believes 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: adverse changes in the national and local economic, business, real estate and
other market conditions; the effect of competition from existing and new self-storage properties and operators on our ability to maintain or raise
occupancy and rental rates; the failure to execute our business plan; adverse impacts from the COVID-19 pandemic, other pandemics, quarantines and
stay at home orders, including the impact on our ability to operate our self-storage properties, the demand for self-storage, rental rates and fees and rent
collection levels; reduced availability and increased costs 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 or future indebtedness; increases in interest rates
and operating costs; counterparty non-performance related to the use of derivative financial instruments; risks related to our ability to maintain our
qualification as a real estate investment trust (“REIT”) for federal income tax purposes; the failure of acquisitions and developments to close on expected
terms, or at all, or to perform as expected; increases in taxes, fees and assessments from state and local jurisdictions; the failure of our joint venture
partners to fulfill their obligations to us or their pursuit of actions that are inconsistent with our objectives; reductions in asset valuations and related
impairment charges; cyber security breaches, cyber attacks or a failure of our networks, systems or technology, which could adversely impact our
business, customer and employee relationships; changes in real estate, zoning, use and occupancy laws or regulations; risks related to or a consequence of
natural disasters or acts of violence, pandemics, active shooters, terrorism, insurrection or war that affect the markets in which we operate; potential
environmental and other liabilities; governmental, administrative and executive orders and laws, which could adversely impact our business operations,
customer and employee relationships; uninsured or uninsurable losses and the ability to obtain insurance coverage against risks and losses; our ability to
attract and retain talent in the current labor market; 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 that the Company files with the SEC or in other documents that the
Company publicly disseminates. The Company undertakes 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 Old Lancaster Road
Malvern, PA 19355
www.cubesmart.com