2 0 2 3
A n n u a l
R E P O R T
CUBESMART ANNUAL REPORT | 2023
2023 HIGHLIGHTS
5.9%
4.1%
FFO, as adjusted
per share growth
1
2
Dividend increase
3.5%
4.2%
Same-store
revenue growth
1
Same-store NOI
growth
$22.0 M
4.1x
Acquisitions
Net Debt/EBITDA
167
New management
contracts
(1) FFO and NOI are non-GAAP financial measures. See Item 7 in our Form 10-K for a discussion of non-GAAP financial measures and reconciliations to the most directly
comparable GAAP financial measures.
(2) Increase to quarterly dividend announced December 7, 2023 for the period ending December 31, 2023 and payable January 16, 2024.
P1
CUBESMART ANNUAL REPORT | 2023
LETTER FROM
THE CEO
Our 2023 results showcased another successful year for the CubeSmart platform. We
successfully grew cash flows as the business continued to normalize off the exceptional
highs from the post-pandemic period. Our portfolio strategy, with its concentration in
top-40 MSAs and focus on high-quality assets with strong demographics, experienced
steadier performance as the lower-beta nature of these assets helped to mitigate the
impact of the tightest housing market in almost 30 years. Our largest market, New York
City, was a leader for our portfolio, as strong demand patterns drove steady, outsized
growth. Overall, urban markets, which rely less on housing-related demand,
outperformed the more volatile Sun Belt markets throughout the year.
P2
CUBESMART ANNUAL REPORT | 2023
Quality Platform
Our investments in systems, processes,
and people continue to bear fruit as we
position ourselves to maximize cash flows
through any macro environment. We
continue to evolve our operating model as
we focus on meeting our customers in the
manner they’re most comfortable
interacting. We made further refinements
to our digital platforms to ensure we’re
providing seamless interactions with our
customers, while enhancing the overall
experience. Our operational focus in 2023
was on simplicity, as we improved
efficiency for our teammates to allow them
to focus on providing our industry-leading
customer service.
The focus on simplicity also applied to our efforts to control
expenses. We found opportunities to streamline processes
to add further efficiencies to our in-store operating model.
Our investments in solar helped to mitigate pressure on
utility expenses while we also had a successful year
appealing property tax assessments. Another year of below-
inflationary expense growth helped to expand same-store
operating margins by 50 basis points.
P3
Quality Portfolio
We remain disciplined with our capital
allocation strategy. Volatility in the capital
markets created dislocation in the
transaction market and limited the
opportunity to find investments with
attractive risk-adjusted returns that fit into
our portfolio strategy. We acquired one
store during the year for $22.0 million and
had an additional two stores under contract
at year end for $20.2 million. Our joint
venture development program is another
key value creator to enhance our portfolio
with infill locations in core markets. We
ended the year with four projects in the
pipeline with a total anticipated capital
contribution of $94.2 million.
CUBESMART ANNUAL REPORT | 2023
P4
CUBESMART ANNUAL REPORT | 2023
Quality Balance Sheet
Our balance sheet is well-positioned to provide financial stability while also providing
substantial capacity to fund future growth. At year end, leverage was at 4.1x net
debt/EBITDA, well below the range for our BBB/Baa2 investment grade credit rating,
providing us with significant capacity to fund future growth. We remain protected from
interest rate volatility, with less than 1% of our debt floating rate and just $31.4 million of
debt set to mature in 2024. Our well-staggered maturity schedule has a weighted-
average maturity of 5.4 years. In December, we announced our 15th consecutive annual
increase to our dividend as we continue to share our cash flow growth with our
shareholders.
4.1x
Net Debt to
EBITDA
99.4%
% of Debt at
Fixed Rate
38.2%
Debt to Gross
Assets
21.8%
Debt to
Enterprise Value
Metrics as of December 31, 2023
P5
CUBESMART ANNUAL REPORT | 2023
Corporate Responsibility
We remain focused on growing in a sustainable manner for the benefit of all our stakeholders.
We believe achieving our ESG (environmental, social, and governance) objectives complements
our business and leads to long-term value creation for our shareholders. Our annual
sustainability report provides detail on our ESG program and highlights our various initiatives
and performance against our stated sustainability targets.
P6
CUBESMART ANNUAL REPORT | 2023
Long-Term Growth
Our strategic focus on quality positions us to produce above-average risk-adjusted returns
throughout economic cycles. Our high-quality platform, with its innovative culture and
proprietary technological systems, is designed to maximize cash flows across all macro
environments. Our high-quality portfolio, with industry-leading demographics in core
markets, is designed to produce more stable cash flows and smooth out some of the
volatility in the market. Our high-quality balance sheet, with its conservative leverage levels
and well-staggered fixed rate maturities, is positioned to efficiently fund future growth. We
head into 2024 well-positioned to continue creating long-term value for all of our
stakeholders.
Christopher P. Marr
President and Chief Executive Officer
April 5, 2024
P7
CUBESMART ANNUAL REPORT | 2023
PORTFOLIO
OVERVIEW
611
Owned Stores
44.1 M
Square Feet
1,406
Total Stores
96.0 M
Square Feet
451 K
Units
932K
Units
States with Owned Stores
States with Managed Stores Only
Data as of December 31, 2023
P8
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
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 ☒
Non-accelerated filer ☐
Accelerated filer
☐
CubeSmart, L.P.:
Large accelerated filer ☐
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.
☒
☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial
statements.
CubeSmart
CubeSmart, L.P.
☐
☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery
period pursuant to § 240.10D-1(b).
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, 2023, 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 $10,005,900,746. As of
February 27, 2024, the number of common shares of CubeSmart outstanding was 224,954,599.
As of June 30, 2023, the last business day of CubeSmart, L.P.’s most recently completed second fiscal quarter, the aggregate market value of the 1,418,549 units of limited partnership (the “OP Units”) held by non-affiliates of
CubeSmart, L.P. was $63,352,398 based upon the last reported sale price of $44.66 per share on the New York Stock Exchange on June 30, 2023 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 2024 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, 2023 of CubeSmart (the “Parent Company” or
“CubeSmart”) and CubeSmart, L.P. (the “Operating Partnership”). The Parent Company is a Maryland real estate investment trust
(“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, 2023, owned a 99.4% interest in
the Operating Partnership. The remaining 0.6% interest consists of OP Units 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
statements. The separate discussions of the Parent Company and the Operating Partnership in this report should be read in conjunction
2
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 1C.
Cybersecurity
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
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
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
5
6
14
27
28
30
32
32
32
32
33
34
44
45
45
45
46
46
47
47
47
47
47
47
48
48
53
4
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 economic conditions in the real estate industry and in the markets in which we own and operate self-storage
properties;
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 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;
increases in interest rates and operating costs;
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 debt;
counterparty non-performance related to the use of derivative financial instruments;
risks related to our ability to maintain our 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;
5
cybersecurity breaches, cyber or ransomware attacks or a failure of our networks, systems or technology, which could adversely
impact our business, customer and employee relationships or result in fraudulent payments;
changes in real estate, zoning, use and occupancy laws or regulations;
risks related to or consequences of earthquakes, hurricanes, windstorms, floods, other natural disasters or acts of violence,
pandemics, active shooters, terrorism, insurrection or war that impact the markets in which we operate;
potential environmental and other material liabilities;
governmental, administrative and executive orders, regulations 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, indemnity or recovery from insurance 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 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, 2023, we owned (or partially owned and consolidated) 611 self-storage properties located in 24 states and in the
District of Columbia containing an aggregate of approximately 44.1 million rentable square feet. As of December 31, 2023, approximately
89.8% of the rentable square footage at our owned stores was leased to approximately 379,000 customers, and no single customer
represented a significant concentration of our revenues. As of December 31, 2023, 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, 2023, we managed 795 stores for third parties (including 77 stores containing an
aggregate of approximately 5.6 million net rentable square feet as part of six separate unconsolidated real estate ventures) bringing the
total number of stores we owned and/or managed to 1,406. As of December 31, 2023, we managed stores for third parties in the District of
Columbia and the following 40 states: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia,
Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri,
Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island,
South Carolina, Tennessee, Texas, 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 or
automated kiosk available to assist our customers during business hours, and 336, or approximately 55.0%, 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
6
highest standard of physical attributes and service in the industry. To that end, 510, or approximately 83.5%, of our owned stores include
climate-controlled cubes.
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, 2023, owned a 99.4% 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.
Acquisition and Disposition Activity
As of December 31, 2023 and 2022, we owned 611 stores that contained an aggregate of 44.1 million rentable square feet with
occupancy levels of 89.8% and 90.3%, respectively. Additional information about our stores is included in Item 2 of this Report. The
following is a summary of our 2023, 2022 and 2021 acquisition and disposition activity:
Asset/Portfolio
2023 Acquisition:
New Jersey Asset
2023 Disposition:
Illinois Asset (1)
2022 Acquisitions:
Maryland Asset
Texas Asset
Georgia Asset
2021 Acquisitions:
Minnesota Asset (2)
Maryland Asset
New Jersey/Pennsylvania Assets
Florida Asset
Georgia Asset
Pennsylvania Asset
Nevada Asset
Storage West Assets
Illinois Asset
2021 Dispositions:
Colorado/Nevada Assets
North Carolina Assets
Texas Asset
Metropolitan Statistical Area
Transaction Date
Stores
Number of
Transaction Price
(in thousands)
New York-Northern New Jersey-Long Island, NY-NJ-PA
December 2023
Chicago-Naperville-Joliet, IL-IN-WI
December 2023
Washington-Arlington-Alexandria, DC-VA-MD-WV
San Antonio, TX
Atlanta, GA
February 2022
June 2022
July 2022
Minneapolis-St. Paul-Bloomington, MN-WI
Baltimore-Towson, MD
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
Miami-Fort Lauderdale-Pompano Beach, FL
Atlanta-Sandy Springs-Marietta, GA
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
Las Vegas-Paradise, NV
Various (see note 4 to our consolidated financial statements)
Chicago-Naperville-Joliet, IL-IN-WI
April 2021
June 2021
July 2021
November 2021
November 2021
November 2021
December 2021
December 2021
December 2021
Denver-Aurora, CO / Las Vegas-Paradise, NV
Burlington, NC
Houston-Sugar Land-Baytown, TX
September 2021
September 2021
November 2021
1
1
1
1
1
1
1
3
1
1
2
1
1
1
1
57
1
66
2
2
1
5
$
$
$
$
$
$
$
$
$
$
22,000
22,000
8,000
8,000
32,000
23,000
20,700
75,700
12,000
22,075
33,000
14,750
15,200
24,500
21,000
1,648,426 (3)
10,300
1,801,251
16,900
21,700
5,200
43,800
(1) This store was subject to an involuntary conversion by the Department of Transportation of the State of Illinois.
(2) This store was acquired by a consolidated joint venture in which we hold a 50% interest.
(3) Purchase price represents the acquisition of all 167,557 outstanding partnership units of LAACO, Ltd. (“LAACO”) for $9,838 per
unit. At the time of the acquisition, LAACO owned 57 storage properties (the “Storage West Assets”) and 50% ownership
interests in two separate joint ventures. Through this acquisition, the Company also acquired LAACO’s wholly-owned
subsidiaries, the Los Angeles Athletic Club and the California Yacht Club (the “Club Operations”). The Los Angeles Athletic
Club was sold by the Company during the year ended December 31, 2022. The California Yacht Club was sold by the Company
during the year ended December 31, 2023. See note 4 to our consolidated financial statements.
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, 2023, 2022 and 2021, we owned (or partially owned and consolidated) 611, 611 and 607 self-storage
7
properties and related assets, respectively. The following table summarizes the change in number of owned stores from January 1, 2021
through December 31, 2023:
Balance - January 1
Stores acquired
Stores developed
Stores combined (1)
Balance - March 31
Stores acquired (2)
Stores developed
Stores combined (1)
Balance - June 30
Stores acquired
Stores developed
Stores sold
Balance - September 30
Stores acquired
Stores developed
Stores sold (3)
Balance - December 31
2023
2022
2021
611
—
—
—
611
—
—
—
611
—
—
—
611
1
—
(1)
611
607
1
—
—
608
1
1
(1)
609
1
1
—
611
—
—
—
611
543
—
1
(1)
543
2
2
—
547
2
—
(4)
545
62
1
(1)
607
(1) On June 21, 2022 and March 3, 2021, we completed development of new stores located in Vienna, VA and Arlington, VA for
approximately $21.8 million and $26.4 million, respectively. In each case, the developed store is located adjacent to an existing
consolidated joint venture store. Given this proximity, each developed store has been combined with the adjacent existing store in
our store count upon opening, as well as for operational and reporting purposes.
(2) For the quarter ended June 30, 2021, includes one store acquired by a consolidated joint venture in which we hold a 50% interest.
(3) For the quarter ended December 31, 2023, relates to one store that was subject to an involuntary conversion by the Department of
Transportation of the State of Illinois.
Financing and Investing Activities
The following summarizes certain financing and investing activities during the year ended December 31, 2023:
Acquisition Activity. We acquired one wholly-owned store located in New Jersey for a purchase price of $22.0 million.
Development Activity. As of December 31, 2023, we had four joint venture development properties under construction, located in
New Jersey (1) and New York (3), which are expected to be completed by the third quarter of 2025. As of December 31, 2023, we
had invested $51.2 million of an expected $94.2 million related to these four projects.
Mortgage Loan Activity. We repaid two mortgage loans with an aggregate outstanding principal balance of $30.5 million.
Business Strategy
Our business strategy consists of several elements:
Maximize cash flow from our stores — 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 2024, we intend to pursue selective acquisitions in markets that we believe
have high barriers to entry, strong demographic and market 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.
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Dispose of stores — During 2024, 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 and for general
corporate purposes.
Grow our third-party management business — We intend to pursue additional third-party management opportunities and
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 executive 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 over 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 with strong demographics and growth, including, but not exclusively
limited to, major metropolitan regions within the United States.
Quality of store — We focus on self-storage properties that have good visibility, ease of access, quality construction, 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 economies of scale.
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 2023 revenues. Our stores in New York, Florida, California and Texas
provided approximately 17%, 15%, 11% and 9%, respectively, of our total revenues for the year ended December 31, 2023. Our stores in
New York, Florida, California and Texas provided approximately 16%, 15%, 11% and 9%, respectively, of our total revenues for the year
ended December 31, 2022. Our stores in New York, Florida, Texas and California provided approximately 19%, 15%, 9% and 8%,
respectively, of our total revenues for the year ended December 31, 2021.
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, 2023, 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
21.8% compared to approximately 24.8% as of December 31, 2022. Our ratio of debt to the undepreciated cost of our total assets as of
December 31, 2023 was approximately 38.2% compared to approximately 39.6% as of December 31, 2022. 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
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manner consistent with maintaining a strong financial position and future financial flexibility, subject to limitations on incurrence of
indebtedness under our unsecured credit facilities and the indenture that governs our unsecured notes. These capital sources may include
existing cash, borrowings under our revolving 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 maintained, 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 emphasize customer service, convenience,
security, professionalism, and cleanliness and, therefore, we believe our stores are well-positioned within their respective markets.
Our key competitors include local and regional operators as well as the other public self-storage REITs, including, but not limited to,
Public Storage, Extra Space 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, consumer
protection measures and various federal, state and local regulations that apply generally to the ownership of real property and the operation
of self-storage properties.
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 existing or suspected contamination or other adverse
environmental conditions that may affect a property.
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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 civil unrest, riots, war or acts of God, pandemics, 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, earthquakes and windstorms, 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, 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, fiduciary obligations, managerial errors and omissions 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.
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. 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, 2023, we employed 3,040 teammates, all within the United States. Of the total employees, approximately 89%
were hourly and approximately 11% were salaried. We have no union presence or collective bargaining agreements. Our average
teammate tenure as of December 31, 2023 was 3.5 years.
Company Culture and Teammate Experience
We measure our teammates’ experience each year through our Teammate Engagement Survey. In 2023, our annual engagement survey
participation rate was 92%. 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. Leaders with team engagement below a certain
threshold are provided with coaching and set goals for improvement. In addition to the survey and our focused support for teams who need
it, we have ongoing conversations and commit 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, we seek 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
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training programs for all levels of the organization, from orientation and general job skills to enhancing leadership capabilities through
skills trainings and mentoring. In 2023, we provided an average of 18 hours of training per teammate.
When recruiting new teammates, our talent acquisition team engages with our store management teams and corporate leaders to identify
a pool of potential candidates to serve our customers and deliver best-in-class customer service. We recruited, hired and trained 1,651
teammates during the year ended December 31, 2023. Teammate referrals were a significant source for the candidates we hired,
accounting for 18% of our new teammates. Additionally, 350 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 and Inclusion
In February 2023, we adopted a Diversity, Equality and Inclusion Policy in addition to our existing Philosophy Regarding Respect in
the Workplace. Our policy can be found in the Corporate Responsibility section of our internet website (www.cubesmart.com) and details
our commitments to support and promote diversity, equality, and inclusion. Nothing on our website, including our Diversity, Equality and
Inclusion Policy or sections thereof, shall be deemed incorporated by reference into this Annual Report.
As of December 31, 2023, of our total teammate population, 56% were female and 44% were male. Approximately 45% have self-
identified as Black or African American, Hispanic or Latino, Asian, American Indian, or of two or more races. The average teammate age
was 42; 35% of our teammates were 34 and younger, while 40% of our teammates were 45 or older.
Sustainability
We are focused on building our company for the long term to generate sustainable growth. To that end, we have established a cross-
functional ESG (Environmental, Social, & Governance) committee responsible for establishing our sustainability priorities and objectives.
Management regularly evaluates sustainability risks faced by our portfolio and believe the low obsolescence, geographic diversification, and
low emissions of our portfolio help to mitigate those risks. Our senior management team reports annually to the Board on the status of our
ESG program, our progress against the goals we’ve set, and provides updates on the various initiatives we’ve undertaken to improve our
sustainability. Our efforts to enact change are highlighted by our sustainability targets which look to track improvements across key ESG
metrics and are aligned to the United Nations Sustainable Development Goals.
A key area of focus from a sustainability perspective is minimizing the impact we make on the environment. Self-storage remains a
low-environmental impact business as it consumes less energy and water while emitting fewer greenhouse gases than other real estate
property types. We continue to look for ways to further reduce our low impact through a variety of initiatives including solar panel
installations, HVAC upgrades, high-efficiency lighting retrofits, green roofs, energy management systems, and paper reduction through our
electronic rental platform.
We encourage you to review our Sustainability Report, which can be found in the Corporate Responsibility section of our website, for
more detailed information regarding our sustainability programs and initiatives. Nothing on our website, including our Sustainability Report
or sections thereof, shall be deemed incorporated by reference into this Annual Report.
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
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www.sec.gov. Our 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 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 at 5 Old Lancaster Road, Malvern, PA
19355 or by telephoning 610-535-5000.
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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, inflation,
deflation, 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 (including those in international
markets) 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, California and Texas
accounted for approximately 17%, 15%, 11% and 9%, respectively, of our total 2023 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.
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
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
14
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 or develop 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 net 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 financial performance.
We intend to continue to acquire individual and portfolios of self-storage properties. 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;
complications (including building moratoriums and anti-growth legislation) in obtaining necessary zoning, occupancy and other
governmental permits; and
unexpected, competitive development that is proposed or announced after our development activities have begun.
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 general market conditions, the market’s perception
of our growth potential, our current and potential future earnings, our cash flow 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.
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If we are unable to promptly re-lease 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-leasing cubes as vacancies arise would reduce our revenues and harm our operating results. In addition, lower than
expected rental rates upon re-leasing 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 near or 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 or
for satisfaction of our debt service obligations.
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.
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 civil unrest, riots, war or acts of God, pandemics, 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, earthquakes and windstorms, are insured subject to limitations involving large
deductibles or co-payments and policy limits that may not be sufficient to cover losses. In particular, certain of our stores are located in
areas that are prone to or at risk of flooding, including coastal flooding, and some of our stores have been previously damaged or otherwise
impacted by hurricanes and other flooding events. 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
16
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, fiduciary obligations, managerial errors and
omissions, 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 may not be 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.
We are subject to risks from the consequences of climate change, including severe weather events, as well as the transition to a low-
carbon economy and other steps taken to prevent or mitigate climate change.
Our self-storage properties are located in areas that may be subject to the direct impacts of climate change, such as increased destructive
weather events like floods, sea level rise, fires, and drought, which could result in significant damage to our stores, increased capital
expenditures, increased expenses, reduced revenues, or reduced demand for our self-storage space. Indirect impacts of climate change
could also adversely impact our business, including through increased costs, such as insurance costs or regulatory compliance costs.
Potential governmental, political and social pressure related to climate change and actions to mitigate climate change could in the future
result in (i) costly changes to newly developed stores or retrofits of our existing stores to reduce carbon emissions through multiple
avenues, including changes to insulation, space configuration, lighting, heating, and air conditioning, (ii) increased energy costs as a result
of transitioning to less carbon-intensive, but more expensive, sources of energy to operate our stores, and (iii) consumers reducing their
individual carbon footprints by owning fewer durable material consumer goods, collectibles, and other such items requiring storage,
resulting in a reduced demand for our self-storage space. In addition, our reputation and investor relationships could be damaged as a
result of our involvement with activities perceived to be causing or exacerbating climate change, as well as any decisions we make to
continue to conduct or change our activities in response to considerations relating to climate change.
Potential liability for environmental contamination could result in substantial costs.
We are subject to federal, state and local environmental laws, ordinances and 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, ordinances and regulations, 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
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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 or discoverable by 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.
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, and breaches of, or failures in the performance
of, our information technology systems could damage our reputation, cause us to incur substantial additional costs and subject us to
litigation.
We are increasingly dependent upon automated information technology processes, including artificial intelligence, 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, host
software, 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, ransomware 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 or make
unavailable to us our confidential information, create system disruptions or cause shutdowns, whether due to malfeasance or human error.
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.
We currently incorporate artificial intelligence solutions into our business, and applications of artificial intelligence may become
important in our operations over time. Our competitors or other third parties may incorporate artificial intelligence into their businesses
more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of
operations. Additionally, if the types of information that artificial intelligence applications assist in producing are or are alleged to be
deficient, inaccurate, or biased, our business, financial condition, and results of operations may be adversely affected.
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:
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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 or delay in collecting 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;
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, geopolitical
tensions, military conflicts, pandemics or the fear or 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 and management fee 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 may otherwise 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 Internal Revenue Service (“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
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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. Congress and the IRS may make changes to the tax laws and regulations, and the courts might issue new
rulings that make it more difficult, or impossible, for us to remain qualified as a REIT. If we fail to qualify as a REIT for federal income
tax purposes and are able to avail ourselves of one or more of the statutory savings provisions in order to maintain our REIT status, we
would nevertheless be required to pay penalty taxes of $50,000 or more for each such failure.
If we fail to qualify as a REIT for federal income tax purposes, and are unable to avail ourselves of certain savings provisions set forth
in the Internal Revenue Code of 1986, as amended (the “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 until the fifth taxable year that begins after the taxable year we
first failed to qualify unless the IRS were to grant us relief under certain statutory provisions. Further, for tax years beginning after
December 31, 2022, we may also be subject to certain taxes enacted by the Inflation Reduction Act of 2022 that are applicable to non-
REIT corporations, including a corporate alternative minimum tax and a nondeductible one percent excise tax on certain stock
repurchases. 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.
LAACO was a publicly traded partnership immediately prior to our acquisition of it on December 9, 2021. Failure of 90% or more of a
publicly traded partnership’s gross income to be “qualifying income” under Section 7704 of the Code in each of its tax years could result
in such entity being taxed as a corporation rather than a partnership for U.S. federal income tax purposes. If LAACO failed to qualify as a
partnership for U.S. federal income tax purposes immediately prior to our acquisition of it, and certain relief provisions do not apply, it
might adversely affect our ability to satisfy the income and asset tests for REIT qualification. In addition, LAACO’s classification as a
corporation for U.S. federal income tax purposes would mean that it has corporate income tax liabilities for all tax years during which it is
classified as a corporation for U.S. federal income tax purposes.
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 likely 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
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subject to a 100% penalty tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to
customers in the ordinary course of business. The determination as to whether a particular sale is a prohibited transaction depends on the
facts and circumstances related to that sale. We cannot guarantee that sales of our properties would not be prohibited transactions unless
we comply with certain statutory safe-harbor provisions.
In addition, any net taxable income earned directly by our taxable REIT subsidiaries, or through entities that are disregarded for federal
income tax purposes as entities separate from our taxable REIT subsidiaries, will be subject to federal and possibly state corporate income
tax. We have elected to treat some of our subsidiaries as taxable REIT subsidiaries, and we may elect to treat other subsidiaries as taxable
REIT subsidiaries in the future. In this regard, several provisions of the laws applicable to REITs and their subsidiaries ensure that a
taxable REIT subsidiary will be subject to an appropriate level of federal income taxation. For example, a taxable REIT subsidiary is
limited in its ability to deduct certain interest payments made to an affiliated REIT. In addition, the REIT has to pay a 100% penalty tax on
some payments that it receives or on some deductions taken by a taxable REIT subsidiary if the economic arrangements between the
REIT, the REIT’s customers, and the taxable REIT subsidiary are not comparable to similar arrangements between unrelated parties.
Finally, some state and local jurisdictions may tax some of our income even though as a REIT we are not subject to federal income tax on
that income because not all states and localities follow the federal income tax treatment of REITs. To the extent that we and our affiliates
are required to pay federal, state and local taxes, we will have less cash available for distributions to our shareholders.
We face possible federal, state and local tax audits.
Because we are organized and qualify as a REIT, we are generally not subject to federal income taxes, but are subject to certain state and
local taxes. Certain entities through which we own real estate either have undergone, or are currently undergoing, tax audits. Although we
believe that we have substantial arguments in favor of our positions in these audits, in some instances there may be 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.
Shareholders are urged to consult with their tax advisors with respect to the status of any regulatory or administrative developments and
proposals and their potential effect on investment in our equity securities.
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 tax 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 tax rates apply, which could
reduce the value of REIT stocks.
Partnership tax audit rules could have a material adverse effect on us.
Under the rules applicable to U.S. federal income tax audits of partnerships, subject to certain exceptions, any audit adjustment to items
of income, gain, loss, deduction, or credit of a partnership (and any partner’s distributive share thereof) is determined, and taxes, interest,
or penalties attributable thereto could be assessed and collected, at the partnership level. Absent available elections, it is possible that the
Operating Partnership, and any other partnership in which we directly or indirectly invest, could be required to pay additional taxes,
interest and penalties as a result of an audit adjustment, and we, as a direct or indirect partner of a partnership, could be required to bear the
economic burden of those taxes, interest, and penalties even though we may not otherwise have been required to pay additional taxes had
we owned the assets of these partnerships directly. There can be no assurance that these rules will not have a material adverse effect on us.
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Risks Related to our Debt Financings
We face risks related to current debt maturities, including refinancing risk.
Certain of our mortgages, bank loans and unsecured debt (including our senior notes) will have significant outstanding balances on their
maturity dates, commonly known as “balloon payments.” We may not have the cash resources available to repay those amounts, and we
may have to raise funds for such repayment either through the issuance of equity or debt securities, additional bank borrowings (which
may include extension of maturity dates), joint ventures or asset sales. Furthermore, we are restricted from incurring certain additional
indebtedness and making certain other changes to our capital and debt structure under the terms of the Credit Facility (defined below) and
senior notes and the indentures governing the Credit Facility and 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, and 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 development and refinance future debt maturities could be adversely
impacted by our inability to secure financing on reasonable terms, if at all.
The terms and covenants relating to our indebtedness could adversely impact our financial 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 or develop 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.
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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.
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 Operating Officer, Chief Legal Officer and Chief Human Resources 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.
The loss of key personnel, including our on-site personnel, or difficulties we encounter in hiring, training and retaining personnel,
including skilled field personnel, may adversely affect our rental revenues.
Our performance depends on our ability to recruit and retain high-quality employees in our stores, in our sales center and in our
corporate headquarters. Our ability to attract and retain corporate, sales, store and other personnel is also acutely impacted in markets
where the competition for a relatively small number of qualified employees is intense. Furthermore, we have experienced, and could
continue to experience, a shortage of labor for certain positions due to certain market trends and conditions which could further decrease
the pool of available talent for key functions.
As of December 31, 2023, we had 2,553 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.
Competitive pressures and the impact of inflation 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
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.
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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 notice or 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.
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;
24
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;
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,
2021 and December 31, 2023, the closing price per share of our common shares has ranged from a high of $57.02 (on December 30, 2021)
to a low of $31.87 (on January 5, 2021). 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.
Inflation, responses to high inflation and 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 continue to increase without a corresponding increase in revenues, our profitability could
diminish and limit our ability to make distributions to our shareholders.
25
The United States Federal Reserve Board and similar international bodies have increased interest rates in recent years to control and
decrease the level of inflation. Such increases in interest rates could have a material effect on our financial performance, as further
described under the heading “The terms and covenants relating to our indebtedness could adversely impact our financial performance.”
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 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, customers or potential customers, 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 a local, national and global 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 or application 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.
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 recoup any increased
expenses through higher prices.
26
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, our interests or the United States, 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.
Environmental, social and governance (“ESG”) issues may have an adverse effect on our business, financial condition and results of
operations and damage our reputation.
Companies across all industries are facing increasing scrutiny relating to their ESG policies. Increased regulatory requirements related to
environmental causes, and related ESG disclosure rules, including the SEC’s disclosure proposal on climate change, may result in
increased compliance costs or increased energy and other costs.
In addition to environmental issues, these constituencies are also focused on social and other governance issues, including matters such
as human capital and social issues. We have established several policies and procedures related to diversity, equity and inclusion as part of
our ESG initiative. Our initiatives also extend from individuals to entire communities, including those we serve.
Any failure to achieve our ESG goals or a perception (whether or not valid) of our failure to act responsibly with respect to the
environmental, social, or governance issues, or to effectively respond to new, or changes in, legal or regulatory requirements concerning
ESG matters, or increased operating costs due to increased regulation or environmental causes could adversely affect our business,
financial condition, results of operations, access to capital and reputation and increase our risk of litigation.
Failure to maintain effective internal control over financial reporting could have a material adverse effect on our business, results of
operations, financial condition, and share price.
Pursuant to the Sarbanes-Oxley Act of 2002, we are required to provide a report by management on internal control over financial
reporting, including management’s assessment of the effectiveness of internal control. Changes to our business will necessitate ongoing
changes to our internal control systems and processes. Internal control over financial reporting may not prevent or detect misstatement
because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud.
Therefore, even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of
financial statements. If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or
improved controls, or if we experience difficulties in their design or implementation, our business, results of operations, and financial
condition could be materially harmed, we could fail to meet our reporting obligations, and there could be a material adverse effect on the
market price of our common shares.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
27
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
We recognize the importance of developing, implementing and maintaining robust measures to safeguard our electronic information
systems and we have established processes, described below, to assess, identify, manage and mitigate risks from cybersecurity threats and
cybersecurity incidents. We believe our processes are reasonable for real estate companies of our size and complexity.
We have integrated cybersecurity risk management into our broader risk management framework to promote a company-wide culture of
cybersecurity risk management. This integration ensures that cybersecurity considerations are an integral part of our decision-making
processes at every level. Under the direction of our Senior Vice President, Information Technology and our Senior Director, Information
Security & Infrastructure (together, the “Cybersecurity Leadership Team”) our Information Technology department regularly monitors
cybersecurity threats and leads the prevention, detection, mitigation and remediation of cybersecurity incidents, with regular reporting to
senior management and to the Board on these topics.
The Critical Security Controls, a prescriptive, prioritized, and standardized set of globally recognized best practices, guide our
information security strategy. The Critical Security Controls are developed and maintained by the Center for Internet Security, Inc., a
nonprofit organization with over 20 years of experience in helping individuals, businesses and governments protect themselves against
cyber threats. We also consider best practices from third-party vendors and payment processors and from the Cloud Security Alliance, a
nonprofit organization that leverages global expertise to offer research and education programs related to cloud security.
Recognizing the complexity and evolving nature of cybersecurity threats, we also retain a range of external experts, including
cybersecurity assessors, consultants and auditors in evaluating and testing our information security processes and systems. These
engagements enable us to access specialized knowledge and insights, ensuring our cybersecurity strategies and processes remain at the
forefront of industry best practices. Our engagements with these third parties include regular audits, threat assessments and consultation on
security enhancements. We also regularly conduct information security training to ensure that all employees, including those who may
come into possession of confidential financial or personally identifiable information, are aware of information security risks and are
equipped to take steps to mitigate such risks. The results of such tests, assessments, reviews and trainings are evaluated by senior
management and our cybersecurity policies, processes and practices are refined as necessary based on the information provided.
We routinely conduct thorough security assessments of our third-party service providers that have access to our electronic information
(including data centers operated by third parties and cloud computing platforms) and we maintain policies and procedures to oversee and
identify cybersecurity risks associated with our use of third-party service providers. Our policies and procedures also include technical
controls and processes, as well as contractual mechanisms to mitigate risk. Assessments are performed biannually by the Cybersecurity
Leadership Team and on a regular basis by their staff.
Since January 1, 2021, we have not experienced any cybersecurity incidents that have resulted in material financial loss. We are not
aware of any cybersecurity threats or cybersecurity incidents that have materially affected or are reasonably likely to materially affect us or
our business strategy, results of operations or financial condition.
Management Oversight
Primary responsibility for the oversight of the assessment, identification and management of our cybersecurity risks rests with our
Senior Vice President, Information Technology. Under her direction, these risk mitigation efforts are designed, tested, and implemented by
our Senior Director, Information Security & Infrastructure. Collectively, the Cybersecurity Leadership Team has over 50 years of
experience in the field of Information Technology, holding relevant academic degrees and industry certifications, including the Certified
Cloud Security Professional and Certified Information Systems Security Professional designations. The Cybersecurity Leadership Team
oversees our information technology governance programs, tests our compliance with standards, remediates known risks, and leads our
employee cybersecurity training program.
The Cybersecurity Leadership Team continually assesses and discusses the latest developments in cybersecurity, including potential
threats and innovative risk management techniques. This ongoing knowledge acquisition enhances our processes that are used to identify,
prevent, mitigate and remediate cybersecurity threats and cybersecurity incidents. The Cybersecurity Leadership Team’s responsibilities
include the deployment of advanced security measures and regular system audits to identify potential vulnerabilities. In the event of a
cybersecurity incident, the Cybersecurity Leadership Team is equipped with a well-defined incident response plan. This plan includes
immediate actions to mitigate the impact of the incident, reporting such events to senior management, and developing strategies for
remediation and prevention of future incidents.
28
The Cybersecurity Leadership Team maintains an ongoing dialogue with senior management regarding emerging or potential
cybersecurity risks. Together, they discuss updates on any significant developments in the cybersecurity domain, ensuring that
management’s oversight is proactive. In addition, a cross-organizational cyber task force, which includes the Cybersecurity Leadership
Team and several members of senior management, meets regularly to consider and address cybersecurity risks, including risks related to
our use of third-party service providers. This task force reports regularly to senior management, who actively participates in strategic
decisions related to cybersecurity, offering guidance and approval for major initiatives. The involvement of senior management in our
cybersecurity strategy ensures that cybersecurity considerations are collaborative and integrated into our broader strategic objectives.
The Cybersecurity Leadership Team regularly informs the cyber task force of all aspects related to cybersecurity risks and incidents.
This ensures that the highest levels of management are kept abreast of the cybersecurity posture and potential risks facing us. Furthermore,
as noted below, significant cybersecurity matters, and strategic risk management decisions are escalated to the Audit Committee and, as
appropriate, the Board, ensuring that such bodies maintain comprehensive oversight and can provide guidance on critical cybersecurity
issues.
Board of Trustees Oversight
The Board acknowledges the importance of managing risks associated with cybersecurity threats and cybersecurity incidents and has
established oversight mechanisms to manage such risks. The Audit Committee is central to the Board’s oversight of cybersecurity risks
and bears the primary responsibility for this domain. The Audit Committee is composed of five independent Trustees, two of whom have
considerable information technology experience.
The Audit Committee receives comprehensive briefings from the Cybersecurity Leadership Team on an annual basis. These briefings
help identify areas for improvement and ensure the alignment of cybersecurity efforts with our overall risk management framework. The
broad range of topics encompassed in these briefings includes:
The current cybersecurity landscape and emerging threats;
Our cybersecurity posture and the effectiveness of our risk management strategies;
The status of ongoing cybersecurity initiatives and strategies; and
Our compliance with regulatory requirements and industry standards.
Our internal controls also provide for the Audit Committee to receive prompt information regarding any cybersecurity incident that
meets established reporting thresholds, as well as for updates regarding any such incident until it has been fully remediated. The Audit
Committee provides updates to the Board regarding such matters, as appropriate.
29
ITEM 2. PROPERTIES
As of December 31, 2023, we owned 611 self-storage properties that contained an aggregate of approximately 44.1 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, 2023.
State
Florida
Texas
California
New York
Arizona
Illinois
New Jersey
Nevada
Maryland
Georgia
Ohio
Massachusetts
Connecticut
Virginia
Pennsylvania
Tennessee
Colorado
North Carolina
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
90
76
63
59
48
42
29
22
20
22
20
20
22
11
12
9
10
9
8
5
4
4
3
2
1
611
65,035
46,914
45,248
84,057
27,896
25,535
21,398
14,613
17,304
14,077
11,131
13,083
10,785
11,032
9,035
5,716
5,544
5,353
3,883
5,321
2,037
2,360
1,696
1,827
585
451,465
6,787,173
5,447,787
4,786,036
4,722,118
3,092,942
2,710,345
2,058,007
1,706,489
1,684,502
1,657,228
1,294,303
1,253,278
1,200,207
1,060,440
890,698
756,020
654,202
611,773
432,324
410,676
247,305
239,388
182,261
175,916
70,386
44,131,804
15.4 %
12.3 %
10.9 %
10.7 %
7.0 %
6.1 %
4.7 %
3.9 %
3.8 %
3.8 %
2.9 %
2.8 %
2.7 %
2.4 %
2.0 %
1.7 %
1.5 %
1.4 %
1.0 %
0.9 %
0.6 %
0.5 %
0.4 %
0.4 %
0.2 %
100.0 %
90.9 %
90.3 %
90.4 %
90.8 %
87.8 %
91.4 %
90.4 %
89.8 %
88.8 %
89.1 %
88.7 %
87.8 %
91.7 %
85.1 %
87.1 %
87.6 %
89.7 %
88.4 %
89.4 %
89.2 %
90.8 %
80.6 %
90.4 %
91.2 %
91.5 %
89.8 %
We have grown by adding stores to our portfolio through acquisitions and development. The tables set forth below show the ending
occupancy, annual rent per occupied square foot and total revenues related to our stores owned as of December 31, 2023, 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/Developed– Ending Occupancy
Year Acquired/Developed (1)
2020 and earlier
2021
2022
2023
Rentable
Ending Occupancy
# of Stores Square Feet 2023
2022
2021
536 38,340,866 90.1 % 91.7 % 92.6 %
5,177,631 89.2 % 83.3 % 87.5 %
523,599 77.3 % 55.5 %
74,465 87.6 %
—
—
—
69
5
1
All stores owned as of December 31, 2023
611 44,116,561 89.8 % 90.3 % 92.0 %
30
Stores by Year Acquired/Developed - Annual Rent Per Occupied Square Foot (2)
Year Acquired/Developed (1)
2020 and earlier
2021
2022
2023
All stores owned as of December 31, 2023
Stores by Year Acquired/Developed - Total Revenues (dollars in thousands)
# of Stores 2023
Annual Rent per Square Foot
2021
2022
536 $ 23.43 $ 22.36 $ 19.79
19.71
—
—
611 $ 23.54 $ 22.45 $ 19.98
21.91
22.43
28.01
20.99
23.42
—
69
5
1
Year Acquired/Developed (1)
2020 and earlier
2021
2022
2023
All stores owned as of December 31, 2023
# of Stores
2023
Total Revenues
2022
2021
536 $ 883,317 $ 857,211 $ 763,635
8,668
—
—
611 $ 996,289 $ 957,694 $ 772,303
104,190
8,668
114
96,047
4,436
—
69
5
1
(1) Represents the year acquired/developed for those stores we acquired from a third party or the year placed in service for those
stores we developed. Tables do not include one development property that was partially completed during the year ended
December 31, 2023.
(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 $19.4 million, $19.2 million and $19.7 million for the periods ended December 31, 2023, 2022 and 2021,
respectively.
Unconsolidated Real Estate Ventures
As of December 31, 2023, we held ownership interests ranging from 10% to 50% in seven unconsolidated real estate ventures for an
aggregate investment carrying value of $98.3 million. We hold 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, 2023, one of these unconsolidated joint ventures
did not own any self-storage properties, while the other six unconsolidated real estate ventures owned a total of 77 self-storage properties
that contained an aggregate of approximately 5.6 million net rentable square feet. The self-storage properties owned by these real estate
ventures are managed by us and are located in Arizona (2), California (2), Connecticut (6), Florida (6), Georgia (2), Illinois (5), Maryland
(2), Massachusetts (6), Minnesota (1), New Jersey (3), New York (1), North Carolina (1), Pennsylvania (1), Rhode Island (2), Texas (35)
and Vermont (2).
Each of the seven real estate 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 of accounting when it is determined that we have the
ability to exercise significant influence over the venture. See note 5 to our 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 covers office upgrades, climate-control enhancements, solar panel installations and other
store upgrades. In 2024, we anticipate spending approximately $18.5 million to $23.5 million associated with these capital expenditures. In
2024, we also anticipate spending approximately $20.5 million to $25.5 million on recurring capital expenditures and approximately $30.0
million to $40.0 million on the development of new self-storage properties.
31
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, 2023:
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)
322
—
—
322
$ 38.13
—
$
—
$
$ 38.13
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.
The Parent Company adopted a share repurchase program in 2007 for up to 3.0 million of the Parent Company’s outstanding common
shares. Unless terminated earlier by resolution of the Board, 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, 2023, there were 161 registered record holders of the Parent Company’s common shares and 20 holders (other than
the Parent Company) of the Operating Partnership’s OP Units. These amounts do not include common shares held by brokers and other
institutions on behalf of shareholders. The Parent Company’s common shares are traded on the New York Stock Exchange (“NYSE”)
under the symbol CUBE. There is no established trading market for units of the Operating Partnership.
Tax Characterization of Distributions
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 Parent
Company’s dividends for 2023 consisted entirely of ordinary income distributions.
32
We intend to continue to declare quarterly distributions. However, we cannot provide any assurance as to the amount or timing of future
distributions.
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
None.
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 FTSE NAREIT All Equity REIT Index as provided
by NAREIT for the period beginning December 31, 2018 and ending December 31, 2023.
Total Return Performance
CubeSmart
S&P 500 Index
Russell 2000 Index
FTSE NAREIT All Equity REITs Index
250
200
150
100
l
e
u
a
V
x
e
d
n
I
50
12/31/18
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
Index
CubeSmart
S&P 500 Index
Russell 2000 Index
FTSE NAREIT All Equity REIT Index
ITEM 6. [Reserved]
For the year ended December 31,
2019
2018
100.00 114.12
100.00 131.49
100.00 125.53
100.00 128.66
2020
127.44
155.68
150.58
122.07
2021
222.49
200.37
172.90
172.49
2022
163.95
164.08
137.56
129.45
2023
197.56
207.21
160.85
144.16
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 both December 31, 2023 and 2022, we owned (or partially owned and consolidated) 611 self-storage properties containing an
aggregate of approximately 44.1 million rentable square feet. As of December 31, 2023, 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, 2023, we managed 795 stores for third parties (including 77 stores containing an
aggregate of approximately 5.6 million net rentable square feet as part of six separate unconsolidated real estate ventures), bringing the
total number of stores we owned and/or managed to 1,406. As of December 31, 2023, we managed stores for third parties in the District of
Columbia and the following 40 states: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia,
Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri,
Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island,
South Carolina, Tennessee, Texas, Vermont, Virginia, Washington and Wisconsin.
We derive substantially all of our revenue from customers who lease space at our stores and fees earned from managing stores.
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, California and Texas provided
approximately 17%, 15%, 11% and 9%, respectively, of total revenues for the year ended December 31, 2023.
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 note 2
to our 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. 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. The Company may also
consider additional factors included in the authoritative guidance, such as whether or not it is the partner in the VIE that is most closely
associated with the VIE. When an entity is not deemed to be a VIE, the Company considers the provisions of additional FASB guidance to
determine whether a general partner, or the general partners as a group, controls a limited partnership or similar entity when the limited
partners have certain rights. The Company consolidates (i) entities that are VIEs and of which the Company is deemed to be the primary
beneficiary and (ii) entities that are non-VIEs which the Company controls and in which the limited partners do not have substantive
participating rights, or the ability to dissolve the entity or remove the Company without cause nor substantive participating rights.
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.
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 asset is generally amortized to expense over the expected remaining term of the respective 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 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 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 or 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, 2023, 2022 and
2021.
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 an asset (or group of assets), (b) the asset is available for immediate sale in its present condition subject only to terms that are
usual and customary for sales of such assets, (c) an active program to locate a buyer and other actions required to complete the plan to sell
the asset have been initiated, (d) the sale of the asset is probable and transfer of the asset is expected to be completed within one year,
35
(e) the asset 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. Assets 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, 2023.
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, 2023, 2022 and 2021.
Differences between the Company's net investment in unconsolidated real estate ventures and its underlying equity in the net assets of
the ventures are primarily a result of the Company acquiring interests in existing unconsolidated real estate ventures. As of December 31,
2023 and 2022, the Company’s net investment in unconsolidated real estate ventures was greater than its underlying equity in the net
assets of the unconsolidated real estate ventures by an aggregate of $31.8 million and $32.7 million, respectively. These differences are
amortized over the lives of the self-storage properties owned by the real estate ventures. This amortization is included in equity in earnings
of real estate ventures within the Company’s consolidated statements of operations.
Results of Operations
The following discussion of our results of operations should be read in conjunction with the Company’s consolidated financial
statements and the accompanying notes thereto. Historical results set forth in the Company’s 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, 2023, we owned
592 same-store properties and 19 non same-store properties. The non same-store property portfolio results include 2022 and 2023
acquisitions, dispositions, newly 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 Company’s consolidated 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, 2023, 2022 and 2021, we owned (or partially owned and consolidated) 611, 611 and 607 self-storage
properties and related assets, respectively.
36
The following table summarizes the change in number of owned stores from January 1, 2021 through December 31, 2023:
Balance - January 1
Stores acquired
Stores developed
Stores combined (1)
Balance - March 31
Stores acquired (2)
Stores developed
Stores combined (1)
Balance - June 30
Stores acquired
Stores developed
Stores sold
Balance - September 30
Stores acquired
Stores developed
Stores sold (3)
Balance - December 31
2023
2022
2021
611
—
—
—
611
—
—
—
611
—
—
—
611
1
—
(1)
611
607
1
—
—
608
1
1
(1)
609
1
1
—
611
—
—
—
611
543
—
1
(1)
543
2
2
—
547
2
—
(4)
545
62
1
(1)
607
(1) On June 21, 2022 and March 3, 2021, we completed development of new stores located in Vienna, VA and Arlington, VA for
approximately $21.8 million and $26.4 million, respectively. In each case, the developed store is located adjacent to an existing
consolidated joint venture store. Given this proximity, each developed store has been combined with the adjacent existing store in
our store count upon opening, as well as for operational and reporting purposes.
(2) For the quarter ended June 30, 2021, includes one store acquired by a consolidated joint venture in which we hold a 50% interest.
(3) For the quarter ended December 31, 2023, relates to one store that was subject to an involuntary conversion by the Department of
Transportation of the State of Illinois.
37
Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022 (dollars and square feet in thousands)
Same-Store Property Portfolio
%
Non Same-Store
Property Portfolio
Other/
Eliminations
Total Portfolio
2023
2022
Change
Change
2023
2022
2023
2022
2023
2022
Change
%
Change
REVENUES:
Rental income
Other property related income
Property management fee income
Total revenues
OPERATING EXPENSES:
Property operating expenses
NET OPERATING INCOME:
$ 882,011
38,420
—
920,431
$ 853,939
35,718
—
889,657
$ 28,072
2,702
—
30,774
3.3 % $ 29,988
1,822
7.6 %
—
0.0 %
31,810
3.5 %
$ 25,350
1,045
—
26,395
$
— $
— $
61,551
36,542
98,093
59,403
34,169
93,572
911,999
101,793
36,542
1,050,334
$
879,289
96,166
34,169
1,009,624
$ 32,710
5,627
2,373
40,710
3.7 %
5.9 %
6.9 %
4.0 %
245,447
674,984
241,833
647,824
3,614
27,160
1.5 %
4.2 %
10,050
21,760
9,133
17,262
39,283
58,810
42,294
51,278
294,780
755,554
293,260
716,364
1,520
39,190
0.5 %
5.5 %
Store count
Total square feet
Period end occupancy
Period average occupancy
Realized annual rent per occupied sq. ft. (1)
592
42,338
592
42,338
90.3 %
91.8 %
91.3 %
93.2 %
$
22.70
$
21.65
19
1,794
19
1,769
77.3 %
66.3 %
611
44,132
611
44,107
89.8 %
90.3 %
Depreciation and amortization
General and administrative
Subtotal
OTHER (EXPENSE) INCOME
Interest:
Interest expense on loans
Loan procurement amortization expense
Equity in earnings of real estate ventures
Other
Total other expense
NET INCOME
Net income attributable to noncontrolling interests in the Operating Partnership
Net loss attributable to noncontrolling interests in subsidiaries
NET INCOME ATTRIBUTABLE TO THE COMPANY’S COMMON SHAREHOLDERS
(1) Realized annual rent per occupied square foot is computed by dividing rental income by the weighted average occupied square feet for the period.
Revenues
201,238
57,041
258,279
310,610
54,623
365,233
(109,372)
2,418
(106,954)
(35.2)%
4.4 %
(29.3)%
(93,065)
(4,141)
6,085
6,281
(84,840)
412,435
(2,535)
857
410,757
$
(93,284)
(3,897)
48,877
(10,355)
(58,659)
219
(244)
(42,792)
16,636
(26,181)
0.2 %
(6.3)%
(87.6)%
160.7 %
(44.6)%
292,472
(1,931)
722
291,263
119,963
(604)
135
$ 119,494
41.0 %
(31.3)%
18.7 %
41.0 %
$
Rental income increased from $879.3 million in 2022 to $912.0 million in 2023, an increase of $32.7 million, or 3.7%. The $28.1
million increase in same-store rental income was due primarily to an increase in rental rates. Realized annual rent per occupied square foot
in our same-store portfolio increased 4.8% as a result of higher rental rates for new and existing customers during 2023 compared to 2022.
Other property related income increased from $96.2 million in 2022 to $101.8 million in 2023, an increase of $5.6 million, or 5.9%. The
$2.7 million increase in same-store other property related income was attributable to a $3.0 million increase in fee revenue. The increase
was also due to a $2.9 million increase in customer storage protection plan participation at our owned and managed stores.
Operating Expenses
Depreciation and amortization decreased from $310.6 million in 2022 to $201.2 million in 2023, a decrease of $109.4 million, or 35.2%.
The decrease was primarily attributable to decreased amortization of in-place lease intangibles related to stores acquired in 2021.
General and administrative expenses increased from $54.6 million in 2022 to $57.0 million in 2023, an increase of $2.4 million, or
4.4%. The increase was primarily attributable to increased personnel expenses.
Other (expense) income
Interest expense on loans decreased from $93.3 million in 2022 to $93.1 million in 2023, a decrease of $0.2 million, or 0.2%. The
decrease was attributable to a lower amount of outstanding debt during 2023 compared to 2022, partially offset by higher interest rates
during 2023 compared to 2022. The average outstanding debt balance decreased by $0.12 billion to $3.02 billion during 2023 as compared
to $3.14 billion during 2022. The weighted average effective interest rate on the Company's outstanding debt for the years ended
December 31, 2023 and 2022 was 3.04% and 2.94%, respectively.
Equity in earnings of real estate ventures decreased from $48.9 million in 2022 to $6.1 million in 2023, a decrease of $42.8 million, or
87.6%. The decrease was primarily due to our portion of the gains and distributions in excess of our equity investment associated with the
sale by 191 IV CUBE Southeast LLC (“HVPSE”) of all of its 14 stores during the year ended December 31, 2022 (see note 5 to our
consolidated financial statements).
38
The component of other (expense) income designated as Other changed from $10.4 million of expense in 2022 to $6.3 million of income
in 2023. This change was primarily due to $10.5 million of transaction-related expenses in 2022 comprised primarily of severance costs
associated with the acquisition of LAACO. In addition, the 2023 amount includes a $4.8 million gain relating to a store that was subject to
an involuntary conversion by the Department of Transportation of the State of Illinois.
Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021
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, 2022 for a comparison of the year ended
December 31, 2022 to the year ended December 31, 2021.
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, loss on early extinguishment 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): equity in earnings of real estate
ventures, gains from sales 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 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
39
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.
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 investors, analysts and other stakeholders consider 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, 2023 and
2022 (in thousands):
Year Ended December 31,
2022
2023
Net income attributable to the Company’s common shareholders
$
410,757 $
291,263
Add (deduct):
Real estate depreciation and amortization:
Real property
Company’s share of unconsolidated real estate ventures
Gains from sales of real estate, net (1)
Noncontrolling interests in the Operating Partnership
FFO attributable to the Company's common shareholders and third-party OP unitholders
(Deduct) add:
Gain on involuntary conversion (2)
Property damage related to hurricane, net of expected insurance proceeds
Transaction-related expenses (3)
FFO, as adjusted, attributable to the Company’s common shareholders and third-party OP unitholders
Weighted average diluted shares outstanding
Weighted average diluted units outstanding owned by third parties
Weighted average diluted shares and units outstanding
$
$
194,845
8,446
(1,477)
2,535
615,106 $
305,845
9,320
(45,705)
1,931
562,654
(4,827)
(844)
—
609,435 $
226,241
1,393
227,634
—
1,266
10,546
574,466
225,881
1,521
227,402
(1) For the year ended December 31, 2022, $45.7 million represents gains related to the sale by 191 IV CUBE Southeast LLC
("HVPSE") of all 14 of its self-storage properties on August 30, 2022. A portion of the proceeds from the sale were held back to
pay venture-level expenses. For the year ended December 31, 2023, $1.7 million represents distributions in excess of our
investment in HVPSE from the proceeds that were held back from this sale. These amounts are included in equity in earnings of
real estate ventures within our consolidated statements of operations. In addition, the year ended December 31, 2023 includes a
$0.2 million loss related to the sale of the California Yacht Club, which was acquired in 2021 as part of the Company's
acquisition of LAACO, Ltd. This amount is included in the component of other (expense) income designated as Other within our
consolidated statements of operations.
40
(2) Relates to a store that was subject to an involuntary conversion by the Department of Transportation of the State of Illinois on
December 19, 2023. This amount is included in the component of other (expense) income designated as Other within our
consolidated statements of operations.
(3) For the year ended December 31, 2022, transaction-related expenses include severance expenses ($10.3 million) and other
transaction expenses ($0.2 million). Prior to our acquisition of LAACO, Ltd. on December 9, 2021, the predecessor company
entered into severance agreements with certain employees, including members of their executive team. These costs were known
to us and the assumption of the obligation to make these payments post-closing was contemplated in our net consideration paid in
the transaction. In accordance with GAAP, and based on the specific details of the arrangements with the employees prior to
closing, these costs are considered post-combination compensation expenses. Transaction-related expenses are included in the
component of other (expense) income designated as Other within our consolidated statements of operations.
Cash Flows
Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022
A comparison of cash flows related to operating, investing and financing activities for the years ended December 31, 2023 and 2022 is
as follows:
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Year Ended December 31,
2023
2022
(in thousands)
Change
$ 611,136 $ 591,466 $ 19,670
$
(93,818) $ (48,767) $ (45,051)
$ (518,026) $ (547,092) $ 29,066
Cash provided by operating activities increased from $591.5 million for the year ended December 31, 2022 to $611.1 million for the
year ended December 31, 2023, reflecting an increase of $19.7 million. Our increased cash flow from operating activities was primarily
attributable to increased net operating income levels in the same-store portfolio in the 2023 period as compared to the corresponding 2022
period.
Cash used in investing activities increased from $48.8 million for the year ended December 31, 2022 to $93.8 million for the year ended
December 31, 2023, reflecting an increase of $45.1 million. The change was primarily the result of a $48.8 million decrease in cash
distributed from real estate ventures due to distributions related to the sale by HVPSE of all 14 of its stores during the 2022 period.
Additionally, net proceeds received from the sale of real estate decreased by $43.0 million as a result of the sale during the 2022 period of
the Los Angeles Athletic Club, which we purchased in December 2021 as part of our acquisition of LAACO, Ltd. Also, development costs
increased by $23.2 million, primarily due to the payment of a put liability associated with a previously consolidated joint venture. These
increases were partially offset by a decrease in acquisitions of storage properties of $66.6 million. We acquired two stores and land during
the year ended December 31, 2022 compared to one store during the corresponding 2023 period.
Cash used in financing activities was $547.1 million for the year ended December 31, 2022 compared to $518.0 million for the year
ended December 31, 2023, reflecting a decrease of $29.1 million. Net repayments on the Credit Facility (as defined below) decreased by
$106.2 million during the 2023 period as compared to the corresponding 2022 period. The change was partially offset by a $55.1 million
increase in cash distributions paid to common shareholders and noncontrolling interests in the Operating Partnership due to an increase in
the common divided per share/unit. Additionally, principal payments on mortgage loans increased $30.2 million due to the repayment of
two secured loans during the 2023 period with no comparable repayments during the 2022 period.
Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021
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, 2022 for a comparison of the year ended December 31,
2022 to the year ended December 31, 2021.
41
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 its REIT
taxable income, excluding capital gains, to its shareholders on an annual basis and must pay federal income tax on undistributed income to
the extent it distributes less than 100% of its REIT taxable income. 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 acquisition and development of new stores. These funding requirements will vary from year to
year, in some cases significantly. In the 2024 fiscal year, we expect recurring capital expenditures to be approximately $20.5 million to
$25.5 million, planned capital improvements and store upgrades to be approximately $18.5 million to $23.5 million and costs associated
with the development of new stores to be approximately $30.0 million to $40.0 million. Our currently scheduled principal payments on
debt are approximately $32.3 million in 2024.
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
(defined below) 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 2024 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, 2023, we had approximately $6.5 million in available cash and cash equivalents. In addition, we had approximately
$831.3 million of availability for borrowings under our Revolver.
42
Unsecured Senior Notes
Our unsecured senior notes are summarized as follows (collectively referred to as the “Senior Notes”):
Unsecured Senior Notes
$300M 4.000% Guaranteed Notes due 2025 (1)
$300M 3.125% Guaranteed Notes due 2026
$550M 2.250% Guaranteed Notes due 2028
$350M 4.375% Guaranteed Notes due 2029
$350M 3.000% Guaranteed Notes due 2030
$450M 2.000% Guaranteed Notes due 2031
$500M 2.500% Guaranteed Notes due 2032
Principal balance outstanding
Less: Discount on issuance of unsecured senior notes, net
Less: Loan procurement costs, net
Total unsecured senior notes, net
December 31,
Effective
2023
2022
Interest Rate
Issuance
Date
Maturity
Date
(in thousands)
$
$
300,000
300,000
550,000
350,000
350,000
450,000
500,000
2,800,000
(10,148)
(13,362)
300,000
300,000
550,000
350,000
350,000
450,000
500,000
2,800,000
(11,801)
(15,849)
$ 2,776,490 $ 2,772,350
3.99 % Various (1)
3.18 % Aug-16
2.33 % Nov-21
Jan-19
4.46 %
Oct-19
3.04 %
2.10 %
Oct-20
2.59 % Nov-21
Nov-25
Sep-26
Dec-28
Feb-29
Feb-30
Feb-31
Feb-32
(1) 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, 2023, the
Operating Partnership was in compliance with all of the financial covenants under the Senior Notes.
Revolving Credit Facility
On December 9, 2011, we entered into a credit agreement (the “Credit Facility”), which was subsequently amended and restated. On
October 26, 2022, we again amended and restated, in its entirety, our Credit Facility (the “Second Amended and Restated Credit Facility”)
which, subsequent to the amendment and restatement, is comprised of an $850.0 million unsecured revolving facility (the “Revolver”)
maturing on February 15, 2027. Under the Second Amended and Restated Credit Facility, pricing on the Revolver is dependent upon our
unsecured debt credit ratings and leverage levels. At our current unsecured debt credit ratings and leverage levels, amounts drawn under
the Revolver are priced using a margin of 0.775% plus a facility fee of 0.15% over the Secured Overnight Financing Rate (“SOFR”) and a
0.10% SOFR adjustment.
As of December 31, 2023, borrowings under the Revolver had an interest rate of 6.41%. Additionally, as of December 31, 2023, $831.3
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 Second 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, 2023, the Operating Partnership was in
compliance with all financial covenants of the Second Amended and Restated Credit Facility.
Issuance of Common Shares
On November 19, 2021 we closed an underwritten offering of 15.5 million common shares at a public offering price of $51.00 per share,
resulting in net proceeds of $765.6 million, after deducting offering costs.
43
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, 2023, 2022 and 2021 is summarized below:
Number of shares sold
Average sales price per share
Net proceeds after deducting offering costs
$
$
2023
For the year ended December 31,
2022
(dollars and shares in thousands, except per share amounts)
4,982
40.57
199,977
102
50.64 $
4,936 $
—
— $
— $
2021
We used proceeds from sales of common shares under the program during the years ended December 31, 2022 and 2021 to fund the
acquisition and development of self-storage properties and for general corporate purposes. As of December 31, 2023, 2022 and 2021, 5.8
million common shares, 5.8 million common shares and 5.9 million common shares, respectively, remained available for issuance under
the Equity Distribution Agreements.
Recent Developments
Subsequent to December 31, 2023, we acquired a two-store portfolio located in Connecticut for a purchase price of $20.2 million.
Other Material Changes in Financial Position
Selected Assets
Storage properties, net
Selected Liabilities
December 31,
2023
2022
(in thousands)
Change
$
5,951,236
$
6,048,003
$
(96,767)
Revolving credit facility
Mortgage loans and notes payable, net
Accounts payable, accrued expenses and other liabilities
18,100
128,186
201,419
60,900
162,918
214,384
(42,800)
(34,732)
(12,965)
Storage properties, net decreased $96.8 million from December 31, 2022 to December 31, 2023 primarily as a result of depreciation on
existing assets partially offset by the acquisition of one storage property, additions and improvements to storage properties, and
development costs incurred during the year.
Revolving credit facility decreased $42.8 million from December 31, 2022 to December 31, 2023 primarily due to available cash that
was used to pay down the revolving credit facility balance.
Mortgage loans and notes payable, net decreased $34.7 million from December 31, 2022 to December 31, 2023 primarily due to the
repayment in June 2023 of two mortgage loans totaling $30.5 million.
Accounts payable, accrued expenses and other liabilities decreased $13.0 million from December 31, 2022 to December 31, 2023
primarily due to the payment during 2023 of a put liability related to the purchase of a noncontrolling member’s interest in a consolidated
joint venture.
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 returns through the
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 may choose to 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, 2023 our consolidated debt consisted of $2.92 billion of outstanding mortgage loans and notes payable and
unsecured senior notes that are subject to fixed rates. Additionally, as of December 31, 2023, there were $18.1 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 $0.2 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 $0.2 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 $122.2 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 $127.1 million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements required by this item appear with an Index to the Consolidated 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,
2023 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, 2023 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
Trading Arrangements
During the three months ended December 31, 2023, none of our Trustees or officers (as defined in Rule 16a-1(f) of the Securities
Exchange Act of 1934, as amended) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as
such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933, as amended).
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
46
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 2024
(the “Proxy Statement”) under the captions “Proposal 1: Election of Trustees,” “Trustee Nominees,” “Named Executive Officers,” “Board
Committee Membership and Meetings,” and “Shareholder Proposals and Nominations for the 2025 Annual Meeting.” The information
required by this item regarding compliance with Section 16(a) of the Exchange Act, if any, is hereby incorporated by reference to the
material appearing in the Parent Company’s Proxy Statement under the caption “Delinquent Section 16(a) Reports,” if applicable.
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,” “Board Committee Membership and Meetings,” “Compensation Discussion
and Analysis,” “Named Executive Officer 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, 2023.
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)
2,763,159 $
—
2,763,159 $
34.75 (1)
—
34.75
1,332,836
—
1,332,836
(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 – Trustee Independence,” and “Policies Regarding 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 - Fees Paid to Our Independent Registered Public Accounting Firm” and “Audit
Committee - Pre-Approval Policies and Procedures.”
47
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a) Documents filed as part of this report:
1. Financial Statements.
The response to this portion of Item 15 is submitted as a separate section of this report.
2. Financial Statement Schedules.
The response to this portion of Item 15 is submitted as a separate section of this report.
3. Exhibits.
The list of exhibits filed with this Report is set forth in response to Item 15(b). The required exhibit index has been filed with the
exhibits.
(b) Exhibits. The following documents are filed as exhibits to this report:
3.1*
3.2*
3.3*
3.4*
3.5*
3.6*
3.7*
3.8*
3.9*
3.10*
3.11*
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.
48
3.12*
Fifth Amended and Restated Bylaws of CubeSmart, effective February 22, 2023, incorporated by reference to Exhibit 3.12 to
the Company’s Annual Report on Form 10-K, filed on February 24, 2023.
4.1*
4.2*
4.3*
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*
Form of Common Share Certificate, incorporated by reference to Exhibit 4.1 to Amendment No. 3 to the Company’s
Registration Statement on Form S-11, filed on October 20, 2004, File No. 333-117848.
Form of Certificate for CubeSmart’s 7.75% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest,
incorporated by reference to Exhibit 4.1 to CubeSmart’s Form 8-A, filed on October 31, 2011.
Indenture, dated as of September 16, 2011, among CubeSmart, L.P., CubeSmart and U.S. Bank National Association,
incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-3, filed on September 16, 2011.
First Supplemental Indenture, dated as of June 26, 2012, among the Company, the Operating Partnership and U.S. Bank
National Association, incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed
on June 26, 2012.
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.
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 4.000% 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.
49
4.17*
4.18*
4.19*
4.20*
4.21*
4.22*
4.23*
4.24*
4.25*
4.26*
4.27*
10.1*†
10.2*†
10.3*†
10.4 *
10.5 *†
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.
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.
Ninth Supplemental Indenture, dated of as November 30, 2021, among CubeSmart, CubeSmart, L.P. and U.S. Bank National
Association, incorporated herein by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K, filed on
November 30, 2021.
Form of $550 million aggregate principal amount of 2.25% senior notes due December 15, 2028, incorporated herein by
reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on November 30, 2021.
Form of CubeSmart Guarantee, incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-
K, filed on November 30, 2021.
Form of $500 million aggregate principal amount of 2.50% senior notes due February 15, 2032, incorporated herein by
reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed on November 30, 2021.
Form of CubeSmart Guarantee, incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-
K, filed on November 30, 2021.
Tenth Supplemental Indenture, dated of as November 30, 2021, among CubeSmart, CubeSmart, L.P. and U.S. Bank National
Association, incorporated herein by reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K, filed on
November 30, 2021.
Form of Indemnification Agreement for Trustees and Executive Officers, incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K, filed on May 17, 2022.
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.
CubeSmart Executive Deferred Compensation Plan, amended and restated effective August 1, 2023, incorporated by
reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2023, filed
on August 4, 2023.
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.
Amended and Restated CubeSmart 2007 Equity Incentive Plan, effective August 1, 2023, incorporated by reference to
Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2023, filed on August 4,
2023.
50
10.6 *†
10.7*†
10.8*†
10.9*†
10.10*
10.11*
10.12*
10.13*
10.14*
10.15*
10.16*
10.17*†
10.18*†
10.19*†
CubeSmart Executive Severance Plan, effective November 1, 2023, incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q, for the fiscal quarter ended September 30, 2023, filed on November 3, 2023.
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.
Second Amended and Restated Credit Agreement, dated as of October 26, 2022, 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 Quarterly Report on Form 10-Q, filed on October 28, 2022.
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.
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.
Agreement and Plan of Merger, by and among LAACO, Ltd., CubeSmart, L.P., CS West Merger Sub, L.P. and Stability
LLC, dated as of November 15, 2021, incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-
K, filed on November 15, 2021.
Form of Non-Qualified Share Option Agreement under the CubeSmart 2007 Equity Incentive Plan, as amended and restated,
effective August 1, 2023, incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 2023, filed on August 4, 2023.
Form of Performance-Vested Restricted Share Grant Agreement under the CubeSmart 2007 Equity Incentive Plan, as
amended and restated, effective August 1, 2023, incorporated by reference to Exhibit 10.5 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 2023, filed on August 4, 2023.
Form of Performance-Vested Restricted Share Unit Grant Agreement under the CubeSmart 2007 Equity Incentive Plan, as
amended and restated, effective August 1, 2023, incorporated by reference to Exhibit 10.6 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 2023, filed on August 4, 2023.
51
10.20*†
10.21*†
10.22*†
10.23*†
10.24*†
21.1
23.1
31.1
31.2
31.3
31.4
32.1
32.2
Form of Restricted Share Grant Agreement (3-Year Vesting) under the CubeSmart 2007 Equity Incentive Plan, as amended
and restated, effective August 1, 2023, incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 2023, filed on August 4, 2023.
Form of Restricted Share Unit Grant Agreement (3-Year Vesting) under the CubeSmart 2007 Equity Incentive Plan, as
amended and restated, effective August 1, 2023, incorporated by reference to Exhibit 10.8 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 2023, filed on August 4, 2023.
Form of Restricted Share Grant Agreement (5-Year Vesting) under the CubeSmart 2007 Equity Incentive Plan, as amended
and restated, effective August 1, 2023, incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 2023, filed on August 4, 2023.
Form of Restricted Share Grant Agreement for Non-Employee Trustees under the CubeSmart 2007 Equity Incentive Plan, as
amended and restated, effective August 1, 2023, incorporated by reference to Exhibit 10.10 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 2023, filed on August 4, 2023.
Form of Restricted Share Unit Grant Agreement for Non-Employee Trustees under the CubeSmart 2007 Equity Incentive
Plan, as amended and restated, effective August 1, 2023, incorporated by reference to Exhibit 10.11 to the Company’s
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2023, filed on August 4, 2023.
List of Subsidiaries.
Consent of KPMG LLP relating to the consolidated financial statements of CubeSmart and 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.
97.1
Clawback Policy, effective December 1, 2023.
99.1
101
Material United States Federal Income Tax Considerations.
The following CubeSmart and CubeSmart, L.P. financial information for the year ended December 31, 2023, 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.
52
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 29, 2024
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/ Deborah Ratner Salzberg
Deborah Ratner Salzberg
/s/ Christopher P. Marr
Christopher P. Marr
/s/ Timothy M. Martin
Timothy M. Martin
/s/ Matthew D. DeNarie
Matthew D. DeNarie
/s/ Piero Bussani
Piero Bussani
/s/ Jit Kee Chin
Jit Kee Chin
/s/ Dorothy Dowling
Dorothy Dowling
/s/ John W. Fain
John W. Fain
/s/ Jair K. Lynch
Jair K. Lynch
/s/ John F. Remondi
John F. Remondi
/s/ Jeffrey F. Rogatz
Jeffrey F. Rogatz
Chair of the Board of Trustees
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
Chief Executive Officer and Trustee
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer)
Chief Accounting Officer
(Principal Accounting Officer)
Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
54
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, L.P.
By:
/s/ Timothy M. Martin
Timothy M. Martin
Chief Financial Officer
Date: February 29, 2024
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/ Deborah Ratner Salzberg
Deborah Ratner Salzberg
/s/ Christopher P. Marr
Christopher P. Marr
/s/ Timothy M. Martin
Timothy M. Martin
/s/ Matthew D. DeNarie
Matthew D. DeNarie
/s/ Piero Bussani
Piero Bussani
/s/ Jit Kee Chin
Jit Kee Chin
/s/ Dorothy Dowling
Dorothy Dowling
/s/ John W. Fain
John W. Fain
/s/ Jair K. Lynch
Jair K. Lynch
/s/ John F. Remondi
John F. Remondi
/s/ Jeffrey F. Rogatz
Jeffrey F. Rogatz
Chair of the Board of Trustees
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
Chief Executive Officer and Trustee
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer)
Chief Accounting Officer
(Principal Accounting Officer)
Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
55
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 (PCAOB ID 185)
CubeSmart and Subsidiaries Consolidated Balance Sheets as of December 31, 2023 and 2022
CubeSmart and Subsidiaries Consolidated Statements of Operations for the years ended December 31, 2023,
2022 and 2021
CubeSmart and Subsidiaries Consolidated Statements of Comprehensive Income for the years ended December 31, 2023,
2022 and 2021
CubeSmart and Subsidiaries Consolidated Statements of Equity for the years ended December 31, 2023, 2022 and 2021
CubeSmart and Subsidiaries Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022
and 2021
CubeSmart, L.P. and Subsidiaries Consolidated Balance Sheets as of December 31, 2023 and 2022
CubeSmart, L.P. and Subsidiaries Consolidated Statements of Operations for the years ended December 31, 2023, 2022
and 2021
CubeSmart, L.P. and Subsidiaries Consolidated Statements of Comprehensive Income for the years ended December 31,
2023, 2022 and 2021
CubeSmart, L.P. and Subsidiaries Consolidated Statements of Capital for the years ended December 31, 2023, 2022
and 2021
CubeSmart, L.P. and Subsidiaries Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022
and 2021
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 consolidated 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 consolidated 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 consolidated 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, 2023, 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, 2023, 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, 2023, has been audited by KPMG LLP
(Philadelphia, Pennsylvania; PCAOB ID #185), an independent registered public accounting firm, as stated in their report that appears
herein.
February 29, 2024
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 consolidated 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 consolidated 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 consolidated 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, 2023, 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, 2023, 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, 2023, has been audited by KPMG LLP
(Philadelphia, Pennsylvania; PCAOB ID #185), an independent registered public accounting firm, as stated in their report that appears
herein.
February 29, 2024
F-3
To the Shareholders and Board of Trustees of CubeSmart:
Report of Independent Registered Public Accounting Firm
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of CubeSmart and subsidiaries (the Company) as of December 31, 2023
and 2022, the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the years in the
three-year period ended December 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year
period ended December 31, 2023, 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, 2023, 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 29, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
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 a 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 the identification and assessment of impairment indicators for certain storage properties
As discussed in Notes 2 and 3 to the consolidated financial statements, the Company had $6.0 billion of storage properties, net of
accumulated depreciation, as of December 31, 2023. The Company evaluates long-lived assets for impairment when events or
circumstances, such as declines in occupancy or operating results, indicate that there may be an impairment.
We identified the evaluation of the identification and assessment of impairment indicators for certain storage properties as a
critical audit matter. Subjective auditor judgment was required to evaluate the Company’s identification and assessment of
impairment indicators, including impacts of declines in occupancy or operating results, for certain storage properties. Changes in
the assessment of declines in occupancy or operating results could have a significant impact on the Company’s identification and
assessment of impairment indicators.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested
the operating effectiveness of an internal control over the Company’s identification and assessment of impairment indicators,
including declines in occupancy or operating results. We evaluated the Company’s identification and assessment of impairment
indicators for certain storage properties, including certain storage properties that had declines in occupancy or declines in operating
results, by:
F-4
assessing management’s impairment policy for storage properties
assessing the completeness of identification of certain storage properties that had impairment indicators
reading the minutes of meetings of the Company’s Board of Trustees for indicators that certain storage properties may be
subject to impairment analysis in accordance with management’s impairment policy
inquiring of Company officials, including those in the organization who are responsible for, and have authority over,
operational activities and compared to management’s analysis.
/s/ KPMG LLP
We have served as the Company’s auditor since 2009.
Philadelphia, Pennsylvania
February 29, 2024
F-5
To the Board of Trustees of CubeSmart and Partners of CubeSmart, L.P.:
Report of Independent Registered Public Accounting Firm
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, 2023 and 2022, the related consolidated statements of operations, comprehensive income, capital, and cash flows for each of
the years in the three-year period ended December 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the years in
the three-year period ended December 31, 2023, 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, 2023, 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 29, 2024 expressed an unqualified opinion on the effectiveness of the Partnership’s internal control over financial reporting.
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 a 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 the identification and assessment of impairment indicators for certain storage properties
As discussed in Notes 2 and 3 to the consolidated financial statements, the Partnership had $6.0 billion of storage properties, net
of accumulated depreciation, as of December 31, 2023. The Partnership evaluates long-lived assets for impairment when events
or circumstances, such as declines in occupancy or operating results, indicate that there may be an impairment.
We identified the evaluation of the identification and assessment of impairment indicators for certain storage properties as a
critical audit matter. Subjective auditor judgment was required to evaluate the Partnership’s identification and assessment of
impairment indicators, including impacts of declines in occupancy or operating results, for certain storage properties. Changes in
the assessment of declines in occupancy or operating results could have a significant impact on the Partnership’s identification
and assessment of impairment indicators.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested
the operating effectiveness of an internal control over the Partnership’s identification and assessment of impairment indicators,
including declines in occupancy or operating results. We evaluated the Partnership’s identification and assessment of impairment
indicators for certain storage properties, including certain storage properties that had declines in occupancy or declines in
operating results, by:
F-6
assessing management’s impairment policy for storage properties
assessing the completeness of identification of certain storage properties that had impairment indicators
reading the minutes of meetings of the Board of Trustees of CubeSmart for indicators that certain storage properties may be
subject to impairment analysis in accordance with management’s impairment policy
inquiring of Partnership officials, including those in the organization who are responsible for, and have authority over,
operational activities and compared to management’s analysis.
/s/ KPMG LLP
We have served as the Partnership’s auditor since 2009.
Philadelphia, Pennsylvania
February 29, 2024
F-7
To the Shareholders and Board of Trustees of CubeSmart:
Report of Independent Registered Public Accounting Firm
Opinion on Internal Control Over Financial Reporting
We have audited CubeSmart and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2023, 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, 2023, 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, 2023 and 2022, the related consolidated statements of operations,
comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related
notes and financial statement schedule III (collectively, the consolidated financial statements), and our report dated February 29, 2024
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 29, 2024
F-8
To the Board of Trustees of CubeSmart and Partners of CubeSmart, L.P.:
Report of Independent Registered Public Accounting Firm
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, 2023,
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, 2023, 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, 2023 and 2022, the related consolidated statements of operations,
comprehensive income, capital, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related
notes and financial statement schedule III (collectively, the consolidated financial statements), and our report dated February 29, 2024
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 29, 2024
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 $180,615 and $167,180, respectively)
Cash and cash equivalents
Restricted cash
Loan procurement costs, net of amortization
Investment in real estate ventures, at equity
Assets held for sale
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
Liabilities held for sale
Total liabilities
Noncontrolling interests in the Operating Partnership
Commitments and contingencies
Equity
Common shares $.01 par value, 400,000,000 shares authorized, 224,921,053 and 224,603,462 shares
issued and outstanding at December 31, 2023 and 2022, 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,
2023
2022
$ 7,367,613 $ 7,295,778
(1,247,775)
6,048,003
6,064
2,861
5,182
105,993
3,745
153,982
$ 6,225,020 $ 6,325,830
(1,416,377)
5,951,236
6,526
1,691
3,995
98,288
—
163,284
$ 2,776,490 $ 2,772,350
60,900
162,918
65,758
214,384
111,190
38,757
1,773
3,428,030
18,100
128,186
65,714
201,419
115,820
38,483
—
3,344,212
60,276
57,419
2,249
4,142,229
(411)
(1,345,239)
2,798,828
21,704
2,820,532
2,246
4,125,478
(491)
(1,301,030)
2,826,203
14,178
2,840,381
$ 6,225,020 $ 6,325,830
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 of real estate ventures
Gains from sales of real estate, net
Other
Total other expense
NET INCOME
Net income attributable to noncontrolling interests in the Operating
Partnership
Net loss attributable to noncontrolling interests in subsidiaries
NET INCOME ATTRIBUTABLE TO THE COMPANY’S COMMON
SHAREHOLDERS
For the year ended December 31,
2022
2023
2021
$
911,999 $
101,793
36,542
1,050,334
879,289 $
96,166
34,169
1,009,624
294,780
201,238
57,041
553,059
(93,065)
(4,141)
—
6,085
—
6,281
(84,840)
412,435
(2,535)
857
293,260
310,610
54,623
658,493
(93,284)
(3,897)
—
48,877
—
(10,355)
(58,659)
292,472
(1,931)
722
707,751
83,605
31,208
822,564
252,104
232,049
47,809
531,962
(78,448)
(8,168)
(20,328)
25,275
32,698
(10,818)
(59,789)
230,813
(7,873)
542
$
410,757 $
291,263 $
223,482
Basic earnings per share attributable to common shareholders
Diluted earnings per share attributable to common shareholders
$
$
1.82 $
1.82 $
1.29 $
1.29 $
1.10
1.09
Weighted average basic shares outstanding
Weighted average diluted shares outstanding
225,424
226,241
224,928
225,881
203,832
205,009
See accompanying notes to the consolidated financial statements.
F-11
CUBESMART AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
NET INCOME
Other comprehensive income:
Reclassification of realized losses on interest rate swaps
OTHER COMPREHENSIVE INCOME:
COMPREHENSIVE INCOME
Comprehensive income attributable to noncontrolling interests in the
Operating Partnership
Comprehensive loss attributable to noncontrolling interests in subsidiaries
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE COMPANY
$
For the year ended December 31,
2022
2023
2021
$
412,435 $
292,472 $
230,813
81
81
412,516
81
81
292,553
(2,536)
857
410,837 $
(1,933)
722
291,342 $
81
81
230,894
(7,892)
542
223,544
See accompanying notes to the consolidated financial statements.
F-12
CUBESMART AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands, except per share data)
Common
Shares
Additional Accumulated Other
Paid-in
Number Amount Capital
197,406 $ 1,974 $ 2,805,673 $
Comprehensive
(Loss) Income
(632) $
Accumulated Shareholders’
Deficit
(974,799) $
Equity
Interests in
Total
Subsidiaries Equity
Total CubeSmart Noncontrolling
Noncontrolling
Interests
in the
Balance at December 31, 2020
Contributions from noncontrolling interests in subsidiaries
Distributions paid to noncontrolling interests in subsidiaries
Acquisition of noncontrolling interest in subsidiary
Issuance of common shares, net
Issuance of restricted shares
Conversion from units to shares
Exercise of stock options
Amortization of restricted shares
Share compensation expense
Adjustment for noncontrolling interests in the Operating Partnership
Net income (loss)
Other comprehensive income, net
Common share distributions ($1.45 per share)
Balance at December 31, 2021
Contributions from noncontrolling interests in subsidiaries
Distributions paid to noncontrolling interests in subsidiaries
Issuance of common shares, net
Issuance of restricted shares
Conversion from units to shares
Exercise of stock options
Amortization of restricted shares
Share compensation expense
Adjustment for noncontrolling interests in the Operating Partnership
Net income (loss)
Other comprehensive income, net
Common share distributions ($1.78 per share)
Balance at December 31, 2022
Contributions from noncontrolling interests in subsidiaries
Distributions paid to noncontrolling interests in subsidiaries
Issuance of common shares, net
Issuance of restricted shares
Conversion from units to shares
Exercise of stock options
Amortization of restricted shares
Share compensation expense
Adjustment for noncontrolling interests in the Operating Partnership
Net income (loss)
Other comprehensive income, net
Common share distributions ($1.98 per share)
Balance at December 31, 2023
20,508
66
5,519
419
205
56
4
(2,746)
965,433
304,959
7,861
4,941
2,271
223,918 $ 2,239 $ 4,088,392 $
102
56
475
52
1
1
4
1
4,876
22,944
1,589
5,134
2,543
224,603 $ 2,246 $ 4,125,478 $
48
126
144
1
2
(276)
5,041
2,714
6,454
2,818
224,921 $ 2,249 $ 4,142,229 $
1,832,216 $
(2,746)
965,638
305,015
7,865
4,941
2,271
(164,109)
223,482
62
(303,072)
2,871,563 $
4,877
1
22,948
1,590
5,134
2,543
27,203
291,263
79
(400,998)
2,826,203 $
(276)
5,042
2,716
6,454
2,818
(8,084)
410,757
80
(446,882)
2,798,828 $
Operating
Partnership
249,414
8,632 $ 1,840,848 $
11,404
(246)
(651)
(542)
11,404
(246)
(3,397)
965,638
305,015
7,865
4,941
2,271
(164,109)
222,940
62
(303,072)
18,597 $ 2,890,160 $
3,690
(7,387)
3,690
(7,387)
4,877
1
22,948
1,590
5,134
2,543
27,203
290,541
79
(400,998)
14,178 $ 2,840,381 $
(722)
8,699
(316)
8,699
(316)
(276)
5,042
2,716
6,454
2,818
(8,084)
409,900
80
(446,882)
(857)
21,704 $ 2,820,532 $
(305,015)
164,109
7,873
19
(8,180)
108,220
(22,948)
(27,203)
1,931
2
(2,583)
57,419
(5,042)
8,084
2,535
1
(2,721)
60,276
(164,109)
223,482
62
(303,072)
(570) $ (1,218,498) $
27,203
291,263
79
(400,998)
(491) $ (1,301,030) $
80
(8,084)
410,757
(446,882)
(411) $ (1,345,239) $
See accompanying notes to the consolidated financial statements.
F-13
CUBESMART AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Operating Activities
Net income
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization
Non-cash portion of interest expense related to finance leases
Loss on early extinguishment of debt
Equity in earnings of real estate ventures
Cash distributed from real estate ventures
Gain on involuntary conversion, net
Gains from sales 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
Acquisition of LAACO, Ltd., net of cash acquired
Additions and improvements to storage properties
Development costs
Investment in real estate ventures
Cash distributed from real estate ventures
Proceeds from sale of real estate, net
Proceeds from involuntary conversion, 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
Mortgage loans and notes payable
Loan procurement costs
Debt prepayment costs
Acquisition of noncontrolling interest in subsidiary, net
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 (used in) provided by financing activities
Change in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Supplemental Cash Flow and Noncash Information
Cash paid for interest, net of interest capitalized
Supplemental disclosure of noncash activities:
Acquisitions of storage properties
Discount on issuance of unsecured senior notes
Mortgage loan assumptions
Accretion of put liability
Derivative valuation adjustment
Contributions from noncontrolling interests in subsidiaries
For the year ended December 31,
2022
2021
2023
$
412,435 $
292,472 $
230,813
205,379
(44)
—
(6,085)
5,467
(4,827)
—
10,089
(886)
(10,138)
96
(350)
611,136 $
(22,429)
—
(39,853)
(47,521)
(21)
8,344
238
7,424
(93,818) $
314,507
(43)
—
(48,877)
—
—
—
9,081
(1,099)
3,498
20,395
1,532
591,466 $
(89,004)
—
(41,233)
(24,358)
(21)
62,656
43,193
—
(48,767) $
—
794,447
—
633,950
—
(837,247)
(32,591)
(69)
—
—
(276)
(817)
2,716
1,100
(316)
(442,217)
(2,756)
(518,026) $
(708)
8,925
8,217 $
—
(782,950)
(2,426)
(3,885)
—
—
4,877
(1,403)
1,590
350
(7,387)
(387,106)
(2,702)
(547,092) $
(4,393)
13,318
8,925 $
240,217
202
20,328
(25,275)
—
—
(32,698)
8,088
(2,037)
(9,247)
14,871
3,923
449,185
(151,547)
(1,678,984)
(34,608)
(69,887)
(28,261)
66,593
44,026
—
(1,852,668)
1,043,427
906,571
(300,000)
(814,471)
(87,263)
(12,548)
(20,023)
(3,397)
965,638
(876)
7,865
8,031
(246)
(273,839)
(8,297)
1,410,572
7,089
6,229
13,318
95,498 $
92,293 $
79,148
— $
— $
— $
— $
81 $
7,599 $
(700) $
— $
— $
2,444 $
81 $
3,340 $
—
6,573
40,880
9,777
81
3,373
$
$
$
$
$
$
$
$
$
$
$
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 $180,615 and $167,180, respectively)
Cash and cash equivalents
Restricted cash
Loan procurement costs, net of amortization
Investment in real estate ventures, at equity
Assets held for sale
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
Liabilities held for sale
Total liabilities
Limited Partnership interests of third parties
Commitments and contingencies
Capital
General Partner
Accumulated other comprehensive loss
Total CubeSmart, L.P. capital
Noncontrolling interests in subsidiaries
Total capital
Total liabilities and capital
$
$
$
December 31,
2023
2022
7,367,613 $
(1,416,377)
5,951,236
6,526
1,691
3,995
98,288
—
163,284
6,225,020 $
7,295,778
(1,247,775)
6,048,003
6,064
2,861
5,182
105,993
3,745
153,982
6,325,830
2,776,490 $
18,100
128,186
65,714
201,419
115,820
38,483
—
3,344,212
2,772,350
60,900
162,918
65,758
214,384
111,190
38,757
1,773
3,428,030
60,276
57,419
2,799,239
(411)
2,798,828
21,704
2,820,532
6,225,020 $
2,826,694
(491)
2,826,203
14,178
2,840,381
6,325,830
$
See accompanying notes to the consolidated financial statements.
F-15
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit data)
For the year ended December 31,
2022
2021
2023
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
Interest:
Interest expense on loans
Loan procurement amortization expense
Loss on early extinguishment of debt
Equity in earnings of real estate ventures
Gains from sales of real estate, net
Other
Total other expense
NET INCOME
$
911,999 $
101,793
36,542
1,050,334
879,289 $
96,166
34,169
1,009,624
294,780
201,238
57,041
553,059
(93,065)
(4,141)
—
6,085
—
6,281
(84,840)
412,435
857
413,292 $
293,260
310,610
54,623
658,493
(93,284)
(3,897)
—
48,877
—
(10,355)
(58,659)
292,472
722
293,194 $
707,751
83,605
31,208
822,564
252,104
232,049
47,809
531,962
(78,448)
(8,168)
(20,328)
25,275
32,698
(10,818)
(59,789)
230,813
542
231,355
Net loss attributable to noncontrolling interests in subsidiaries
NET INCOME ATTRIBUTABLE TO CUBESMART L.P.
Basic earnings per unit attributable to CubeSmart, L.P.
Diluted earnings per unit attributable to CubeSmart, L.P.
Weighted average basic units outstanding
Weighted average diluted units outstanding
$
$
$
1.82 $
1.82 $
1.29 $
1.29 $
1.10
1.09
226,817
227,634
226,449
227,402
210,949
212,126
See accompanying notes to the consolidated financial statements.
F-16
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
NET INCOME
Other comprehensive income:
Reclassification of realized losses on interest rate swaps
OTHER COMPREHENSIVE INCOME:
COMPREHENSIVE INCOME
Comprehensive loss attributable to noncontrolling interests in subsidiaries
COMPREHENSIVE INCOME ATTRIBUTABLE TO CUBESMART, L.P.
$
For the year ended December 31,
2022
2021
2023
$
412,435 $
292,472 $
230,813
81
81
412,516
857
413,373 $
81
81
292,553
722
293,275 $
81
81
230,894
542
231,436
See accompanying notes to the consolidated financial statements.
F-17
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITAL
(in thousands, except per unit data)
Balance at December 31, 2020
Contributions from noncontrolling interests in subsidiaries
Distributions paid to noncontrolling interests in subsidiaries
Acquisition of noncontrolling interest in subsidiary
Issuance of OP units, net
Issuance of restricted OP units
Conversion from OP units to shares
Exercise of OP unit options
Amortization of restricted OP units
OP unit compensation expense
Adjustment for Limited Partnership interests of third parties
Net income (loss)
Other comprehensive income, net
OP unit distributions ($1.45 per unit)
Balance at December 31, 2021
Contributions from noncontrolling interests in subsidiaries
Distributions paid to noncontrolling interests in subsidiaries
Issuance of OP units, net
Issuance of restricted OP units
Conversion from OP units to shares
Exercise of OP unit options
Amortization of restricted OP units
OP unit compensation expense
Adjustment for Limited Partnership interests of third parties
Net income (loss)
Other comprehensive income, net
OP unit distributions ($1.78 per unit)
Balance at December 31, 2022
Contributions from noncontrolling interests in subsidiaries
Distributions paid to noncontrolling interests in subsidiaries
Issuance of OP units, net
Issuance of restricted OP units
Conversion from OP units to shares
Exercise of OP unit options
Amortization of restricted OP units
OP unit compensation expense
Adjustment for Limited Partnership interests of third parties
Net income (loss)
Other comprehensive income, net
OP unit distributions ($1.98 per unit)
Balance at December 31, 2023
General Partner
Accumulated
Other
OP Units
Outstanding
197,406
Amount
$ 1,832,848 $
Comprehensive
(Loss) Income
Total
CubeSmart L.P.
Capital
Noncontrolling
Interests in
Subsidiaries
Total
Capital
8,632 $ 1,840,848 $
(632) $
1,832,216 $
Limited
Partnership
Interests
of Third Parties
249,414
20,508
66
5,519
419
(2,746)
965,638
305,015
7,865
4,941
2,271
(164,109)
223,482
223,918
(303,072)
$ 2,872,133 $
62
(570) $
102
56
475
52
4,877
1
22,948
1,590
5,134
2,543
27,203
291,263
224,603
(400,998)
$ 2,826,694 $
79
(491) $
48
126
144
(276)
5,042
2,716
6,454
2,818
(8,084)
410,757
(446,882)
80
224,921 $ 2,799,239 $
(411) $
(2,746)
965,638
305,015
7,865
4,941
2,271
(164,109)
223,482
62
(303,072)
2,871,563 $
4,877
1
22,948
1,590
5,134
2,543
27,203
291,263
79
(400,998)
2,826,203 $
(276)
5,042
2,716
6,454
2,818
(8,084)
410,757
80
(446,882)
2,798,828 $
11,404
(246)
(651)
(542)
11,404
(246)
(3,397)
965,638
305,015
7,865
4,941
2,271
(164,109)
222,940
62
(303,072)
18,597 $ 2,890,160 $
3,690
(7,387)
(722)
3,690
(7,387)
4,877
1
22,948
1,590
5,134
2,543
27,203
290,541
79
(400,998)
14,178 $ 2,840,381 $
8,699
(316)
(857)
8,699
(316)
(276)
5,042
2,716
6,454
2,818
(8,084)
409,900
80
(446,882)
21,704 $ 2,820,532 $
(305,015)
164,109
7,873
19
(8,180)
108,220
(22,948)
(27,203)
1,931
2
(2,583)
57,419
(5,042)
8,084
2,535
1
(2,721)
60,276
See accompanying notes to the consolidated financial statements.
F-18
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Operating Activities
Net income
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization
Non-cash portion of interest expense related to finance leases
Loss on early extinguishment of debt
Equity in earnings of real estate ventures
Cash distributed from real estate ventures
Gain on involuntary conversion, net
Gains from sales 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
Acquisition of LAACO, Ltd., net of cash acquired
Additions and improvements to storage properties
Development costs
Investment in real estate ventures
Cash distributed from real estate ventures
Proceeds from sale of real estate, net
Proceeds from involuntary conversion, 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
Mortgage loans and notes payable
Loan procurement costs
Debt prepayment costs
Acquisition of noncontrolling interest in subsidiary, net
Issuance of common OP units, net
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 (used in) provided by financing activities
Change in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Supplemental Cash Flow and Noncash Information
Cash paid for interest, net of interest capitalized
Supplemental disclosure of noncash activities:
Acquisitions of storage properties
Discount on issuance of unsecured senior notes
Mortgage loan assumptions
Accretion of put liability
Derivative valuation adjustment
Contributions from noncontrolling interests in subsidiaries
For the year ended December 31,
2022
2023
2021
$
412,435 $
292,472 $
230,813
205,379
(44)
—
(6,085)
5,467
(4,827)
—
10,089
(886)
(10,138)
96
(350)
611,136 $
(22,429)
—
(39,853)
(47,521)
(21)
8,344
238
7,424
(93,818) $
314,507
(43)
—
(48,877)
—
—
—
9,081
(1,099)
3,498
20,395
1,532
591,466 $
(89,004)
—
(41,233)
(24,358)
(21)
62,656
43,193
—
(48,767) $
—
794,447
—
633,950
—
(837,247)
(32,591)
(69)
—
—
(276)
(817)
2,716
1,100
(316)
(444,973)
(518,026) $
(708)
8,925
8,217 $
—
(782,950)
(2,426)
(3,885)
—
—
4,877
(1,403)
1,590
350
(7,387)
(389,808)
(547,092) $
(4,393)
13,318
8,925 $
240,217
202
20,328
(25,275)
—
—
(32,698)
8,088
(2,037)
(9,247)
14,871
3,923
449,185
(151,547)
(1,678,984)
(34,608)
(69,887)
(28,261)
66,593
44,026
—
(1,852,668)
1,043,427
906,571
(300,000)
(814,471)
(87,263)
(12,548)
(20,023)
(3,397)
965,638
(876)
7,865
8,031
(246)
(282,136)
1,410,572
7,089
6,229
13,318
95,498 $
92,293 $
79,148
— $
— $
— $
— $
81 $
7,599 $
(700) $
— $
— $
2,444 $
81 $
3,340 $
—
6,573
40,880
9,777
81
3,373
$
$
$
$
$
$
$
$
$
$
$
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, 2023, the Company owned
(or partially owned and consolidated) 611 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, 2023, the Parent Company owned approximately 99.4% of the partnership interests (“OP Units” or “common
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
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. Such noncontrolling
interests are reported on the Company’s consolidated balance sheets within equity, separately from the Company’s equity. Within the
Company’s 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 amounts, including both the amounts attributable to the Company and
F-20
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 on the Company’s 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 on the Company’s consolidated balance sheets. Net income or loss related to these noncontrolling interests is
excluded from net income or loss within the Company’s 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, 2023, as the estimated redemption value exceeded their carrying value.
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. There is a degree of uncertainty inherent in these
estimates and assumptions, and changes in market conditions could impact the Company’s future operating results.
Reclassifications
Certain amounts on the Company’s and the Operating Partnership’s consolidated balance sheets have been reclassified in prior years to
conform to the current year presentation. Additionally, the Operating Partnership’s consolidated statements of operations have been
updated to conform to the current year presentation.
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. 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.
F-21
Purchase Price Allocation
When stores are acquired in an asset acquisition, the purchase price and acquisition-related costs are allocated to the tangible and
intangible assets acquired and liabilities assumed based on estimated relative fair values. Allocations to land, building and improvements
and equipment are recorded based upon their respective relative 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 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 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 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 $29.1 million and $3.4 million, respectively, for the year ended December 31, 2023, and $32.3 million and $121.6
million, respectively, for the year ended December 31, 2022.
Impairment of Long-Lived Assets
We evaluate long-lived assets for impairment when events or 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 asset’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, 2023, 2022 and 2021.
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
an asset (or group of assets), (b) the asset is available for immediate sale in its present condition subject only to terms that are usual and
customary for sales of such assets, (c) an active program to locate a buyer and other actions required to complete the plan to sell the asset
have been initiated, (d) the sale of the asset is probable and transfer of the asset is expected to be completed within one year, (e) the asset 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. Assets 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
assets classified as held for sale as of December 31, 2023.
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.
F-22
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, as well as utility deposits.
Loan Procurement Costs
Loan procurement costs related to borrowings were $53.7 million and $53.9 million as of December 31, 2023 and 2022, respectively,
and are reported net of accumulated amortization of $25.3 million and $19.8 million as of December 31, 2023 and 2022, respectively. In
accordance with ASU No. 2015-03, Loan procurement costs, net are presented as a direct deduction from the carrying amount of the
related debt liability. If there is not an associated debt liability recorded on the Company’s 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 within the
Company’s consolidated statements of operations.
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 of accounting,
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, 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, 2023 and 2022.
Differences between the Company's net investment in unconsolidated real estate ventures and its underlying equity in the net assets of
the ventures are primarily a result of the Company acquiring interests in existing unconsolidated real estate ventures. As of December 31,
2023 and 2022, the Company’s net investment in unconsolidated real estate ventures was greater than its underlying equity in the net
assets of the unconsolidated real estate ventures by an aggregate of $31.8 million and $32.7 million, respectively. These differences are
amortized over the lives of the self-storage properties owned by the real estate ventures. This amortization is included in equity in earnings
of real estate ventures within the Company’s consolidated statements of operations.
Other Assets
Other assets are comprised of the following as of December 31, 2023 and 2022:
Intangible assets, net of accumulated amortization of $164 and $2,263, respectively
Accounts receivable, net
Prepaid property taxes
Prepaid insurance
Amounts due from affiliates (see note 14)
Assets related to deferred compensation arrangements
Right-of-use assets - operating leases
Ground lease receivable
Other
Total other assets, net
December 31,
2023
2022
(in thousands)
$
$
1,806 $
8,944
8,171
4,879
18,045
60,038
50,476
6,193
4,732
163,284 $
1,181
7,932
8,033
2,129
15,947
55,572
49,491
6,138
7,559
153,982
F-23
Revenue Recognition
Management has determined that substantially 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 sales of real estate in accordance with the guidance on transfer of nonfinancial assets. Payments
received from purchasers prior to closing are recorded as deposits. Gains on real estate sold are 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. These
costs are expensed as incurred. The Company incurred $24.5 million, $22.4 million and $21.0 million in advertising and marketing
expenses for the years ended December 31, 2023, 2022 and 2021, respectively, which are included in Property operating expenses within
the Company’s consolidated statements of operations.
Equity Offering Costs
Underwriting discounts and commissions, financial advisory fees and other offering costs are reflected as a reduction to additional paid-
in capital. For the years ended December 31, 2023, 2022 and 2021, the Company recognized $0.3 million, $0.2 million and $28.3 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, 2023, 2022 and 2021, the Company capitalized $1.3 million, $1.3 million and $1.9 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 using
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, 2023 or 2022.
Income Taxes
The Company has elected to be taxed as a REIT under Sections 856-860 of the Internal Revenue Code since the Company’s
commencement of operations in 2004. Management believes that 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 $6,022.1 million
and $6,145.8 million as of December 31, 2023 and 2022, respectively.
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
F-24
characterization of dividends paid during the preceding year as ordinary income, capital gain or return of capital. The Company’s
dividends for 2023 consisted entirely of ordinary income distributions.
The Company is subject to a 4% federal excise tax if sufficient taxable income is not distributed within prescribed time limits. The
excise tax equals 4% of the annual amount, if any, by which the sum of (a) 85% of the Company’s ordinary income, (b) 95% of the
Company’s net capital gains and (c) 100% of prior year undistributed taxable income exceeds cash distributions and certain taxes paid by
the Company. No excise tax was incurred in 2023, 2022 or 2021.
Taxable REIT subsidiaries are subject to federal and state income taxes. Our taxable REIT subsidiaries had a net deferred tax liability of
$1.1 million and $1.0 million as of December 31, 2023 and 2022, respectively.
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 817,000, 953,000 and 1,177,000 for the years ended
December 31, 2023, 2022 and 2021, 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 within the Company’s consolidated statement of operations. The Company recognizes forfeitures on
share-based payments as they occur.
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07 –
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amended guidance requires the disclosure of
incremental segment information, including significant segment expenses that are regularly provided to the chief operating decision maker
(“CODM”) and a reconciliation of segment profit or loss to net income. The title and position of the CODM must also be disclosed, along
with how the CODM uses the reported measures to assess segment performance and to allocate resources. Entities with a single reportable
segment (such as the Company) will be required to provide the disclosures required by Topic 280, as amended. ASU 2023-07 is effective
for fiscal years beginning after December 15, 2023. The adoption of this guidance is not expected to have a material impact 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, California and Texas provided approximately
17%, 15%, 11% and 9%, respectively, of the Company’s total revenues for the year ended December 31, 2023. The stores in New York,
Florida, California and Texas provided approximately 16%, 15%, 11% and 9%, respectively, of the Company’s total revenues for the year
ended December 31, 2022. The stores in New York, Florida, Texas and California provided approximately 19%, 15%, 9% and 8%,
respectively, of the Company’s total revenues for the year ended December 31, 2021.
F-25
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
December 31,
2023
2022
(in thousands)
1,594,742 $
5,517,544
144,372
69,010
41,945
7,367,613
(1,416,377)
5,951,236
$
1,588,138
5,483,506
144,605
37,584
41,945
7,295,778
(1,247,775)
6,048,003
$
$
The following table summarizes the Company’s acquisition and disposition activity for the years ended December 31, 2023, 2022 and
2021:
Asset/Portfolio
2023 Acquisition:
New Jersey Asset
2023 Disposition:
Illinois Asset (1)
2022 Acquisitions:
Maryland Asset
Texas Asset
Georgia Asset
2021 Acquisitions:
Minnesota Asset (2)
Maryland Asset
New Jersey/Pennsylvania Assets
Florida Asset
Georgia Asset
Pennsylvania Asset
Nevada Asset
Storage West Assets
Illinois Asset
2021 Dispositions:
Colorado/Nevada Assets
North Carolina Assets
Texas Asset
Metropolitan Statistical Area
Transaction Date
Stores
Number of
Transaction Price
(in thousands)
New York-Northern New Jersey-Long Island, NY-NJ-PA
December 2023
Chicago-Naperville-Joliet, IL-IN-WI
December 2023
Washington-Arlington-Alexandria, DC-VA-MD-WV
San Antonio, TX
Atlanta, GA
February 2022
June 2022
July 2022
Minneapolis-St. Paul-Bloomington, MN-WI
Baltimore-Towson, MD
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
Miami-Fort Lauderdale-Pompano Beach, FL
Atlanta-Sandy Springs-Marietta, GA
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
Las Vegas-Paradise, NV
Various (see note 4)
Chicago-Naperville-Joliet, IL-IN-WI
April 2021
June 2021
July 2021
November 2021
November 2021
November 2021
December 2021
December 2021
December 2021
Denver-Aurora, CO / Las Vegas-Paradise, NV
Burlington, NC
Houston-Sugar Land-Baytown, TX
September 2021
September 2021
November 2021
1
1
1
1
1
1
1
3
1
1
2
1
1
1
1
57
1
66
2
2
1
5
$
$
$
$
$
$
$
$
$
$
22,000
22,000
8,000
8,000
32,000
23,000
20,700
75,700
12,000
22,075
33,000
14,750
15,200
24,500
21,000
1,648,426 (3)
10,300
1,801,251
16,900
21,700
5,200
43,800
(1) This store was subject to an involuntary conversion by the Department of Transportation of the State of Illinois.
(2) This store was acquired by a consolidated joint venture in which the Company holds a 50% interest.
(3) Purchase price represents the acquisition of all 167,557 outstanding partnership units of LAACO, Ltd. (“LAACO”) for $9,838 per
unit. At the time of the acquisition, LAACO owned 57 storage properties (the “Storage West Assets”) and 50% ownership
interests in two separate joint ventures. Through this acquisition, the Company also acquired LAACO’s wholly-owned
subsidiaries, the Los Angeles Athletic Club and the California Yacht Club (the “Club Operations”). The Los Angeles Athletic
F-26
Club was sold by the Company during the year ended December 31, 2022. The California Yacht Club was sold by the Company
during the year ended December 31, 2023.
4. INVESTMENT ACTIVITY
2023 Acquisition
During the year ended December 31, 2023, the Company acquired one store located in New Jersey for a purchase price of $22.0
million. In connection with this transaction, 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 relative fair value. Intangible assets consisted of in-
place leases, which aggregated to $2.0 million at the time of the acquisition and prior to amortization of such amounts. The estimated life
of these in-place leases is 12 months and the amortization expense that was recognized during the year ended December 31, 2023 was
approximately $0.2 million.
As of December 31, 2023 the Company had made a deposit of $0.2 million associated with a portfolio of two stores that was under
contract to be acquired for an acquisition price of $20.2 million (see note 18). This deposit is reflected in Other assets, net on the
Company’s consolidated balance sheets.
2023 Dispositions
During the year ended December 31, 2023, the Company sold the California Yacht Club, which it purchased in December 2021 as part
of the LAACO acquisition, for $0.8 million. A loss of $0.2 million was recognized in conjunction with the sale. This loss is included in the
component of other (expense) income designated as Other within the Company’s consolidated statements of operations.
Additionally, in December 2023, a store was subject to an involuntary conversion by the Department of Transportation of the State of
Illinois. The Company received $8.0 million as consideration and recorded a gain of $4.8 million. This gain is included in the component
of other (expense) income designated as Other within the Company’s consolidated statements of operations.
2022 Acquisitions
During the year ended December 31, 2022, the Company acquired three stores located in Georgia (1), Maryland (1) and Texas (1) for
an aggregate purchase price of $75.7 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 relative fair
value. Intangible assets consisted of in-place leases, which aggregated to $3.4 million at the time of the acquisition and prior to
amortization of such amounts. The estimated life of these in-place leases is 12 months and the amortization expense that was recognized
during the years ended December 31, 2023 and 2022 was approximately $1.1 million and $2.3 million, respectively.
Additionally, on February 2, 2022, the Company acquired land underlying a wholly-owned store located in Bronx, New York for $7.5
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 $4.1 million and $5.0 million, respectively, were removed from the Company’s consolidated balance sheets.
Also, on April 28, 2022, the Company acquired land underlying a store owned by 191 IV CUBE LLC, an unconsolidated joint venture
in which the Company holds a 20% ownership interest (see note 5). The purchase price for the land was $6.1 million, and the Company
now serves as the lessor in a ground lease to 191 IV CUBE LLC.
2022 Disposition
During the year ended December 31, 2022, the Company sold the Los Angeles Athletic Club, which it purchased in December 2021
as part of the LAACO acquisition, for $44.0 million. No gain or loss was recognized in conjunction with the sale.
Development Activity
As of December 31, 2023, the Company had invested in consolidated joint ventures to develop four self-storage properties located in
New Jersey (1) and New York (3). Construction for these projects is expected to be completed by the third quarter of 2025. As of
December 31, 2023, development costs incurred to date for these projects totaled $59.3 million. Total construction costs for these projects
F-27
are expected to be $109.7 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 of and opened for operation the following stores since January 1, 2021. 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
Valley Stream, NY (1)
Vienna, VA (2)
Newton, MA (3)
East Meadow, NY (1)
King of Prussia, PA
Arlington, VA (2)
1
1
1
1
1
1
6
Q3 2022
Q2 2022
Q4 2021
Q2 2021
Q2 2021
Q1 2021
CubeSmart
Ownership
Interest
100%
80%
100%
100%
70%
90%
Total
Construction Costs
(in thousands)
$
$
37,200
21,800
20,800
25,900
22,800
26,400
154,900
(1) These stores were previously owned by two separate consolidated joint ventures, of which the Company held a 51% ownership
interest in each. On June 29, 2021, the noncontrolling member in the venture that owned the East Meadow, NY store put its 49%
interest in the venture to the Company for $6.6 million. On January 18, 2023, the noncontrolling member in the venture that
owned the Valley Stream, NY store put its 49% interest in the venture to the Company for $15.3 million. The cash payments
related to each of these transactions are included in Development costs in the consolidated statements of cash flows.
(2) Each of these stores are located adjacent to an existing consolidated joint venture store. Given this proximity, each of these stores
has been combined with the adjacent existing store in our store count upon opening, as well as for operational and reporting
purposes.
(3) During the fourth quarter of 2021, the Company, through a joint venture in which it owned a 90% interest that was previously
consolidated, completed the construction of this store and it was opened for operation. On December 14, 2021, the Company
acquired the 10% interest of the noncontrolling member in the venture that owned the store for $3.4 million. Prior to this
transaction, the noncontrolling member’s interest in this venture was reported in Noncontrolling interests in subsidiaries on the
Company’s 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 difference between the purchase price paid by the Company and the carrying
amount of the noncontrolling interest of $2.7 million was recorded as an adjustment to equity attributable to the Company, with
no gain or loss recorded. The $13.2 million related party loan extended by the Company to the venture that owned the store was
repaid in conjunction with the Company’s acquisition of the noncontrolling member’s ownership interest.
During the year ended December 31, 2023, construction on a portion of the Company’s development property in Astoria, NY was
substantially completed and opened for operation. The remainder of the development is expected to be completed during the second
quarter of 2024.
LAACO Acquisition
On December 9, 2021, the Company acquired all outstanding partnership units of LAACO, the owner of the Storage West Assets and,
as a result, LAACO became a wholly-owned subsidiary of the Company. The 57 Storage West Assets are located in Arizona (17),
California (20), Nevada (13) and Texas (7). Through its acquisition of LAACO, the Company also acquired a 50% interest in two separate
unconsolidated joint ventures, each of which own one storage property in California (see note 5). In addition, through this acquisition, the
Company also acquired the Club Operations, which included the Los Angeles Athletic Club (consisting of athletic facilities, food and
beverage operations and a hotel) and the California Yacht Club (consisting of sports facilities, food and beverage operations and a marina).
During the year ended December 31, 2022, the Company sold the Los Angeles Athletic Club (see above). During the year ended
December 31, 2023, the Company sold the California Yacht Club (see above).
F-28
The following summarizes the relevant components contemplated in the acquisition of LAACO:
Costs contemplated:
Capitalized costs:
LAACO partnership units (1)
Long-term debt assumed and repaid at closing
Payments to LAACO management (capitalized) (2)
Other transaction costs (3)
Total capitalized costs
Payments and anticipated payments to LAACO management (expensed) (2)
Total costs contemplated
Estimated fair value of Club Operations (included in total costs contemplated above)
(1) Represents the acquisition of all 167,557 outstanding partnership units for $9,838 per unit.
Amount
(in thousands)
$
$
$
$
1,648,426
40,880
16,807
13,407
1,719,520
25,144
1,744,664
46,800
(2) Upon the acquisition of LAACO, the Company assumed severance obligations payable to certain employees pursuant to pre-
existing agreements. Based on the specific details of the arrangements, $16.8 million in costs were capitalized to the basis of the
acquired properties while $25.1 million were considered post-combination compensation expenses. Of this $25.1 million, $10.3
million and $14.8 million were included in the component of other (expense) income designated as Other for the years ended
December 31, 2022 and 2021, respectively. There were no severance costs recognized during the year ended December 31, 2023.
(3) Includes consulting fees, legal fees, and other costs.
The Company accounted for the acquisition of LAACO as an asset acquisition. As a result, the capitalized costs noted above were
allocated to LAACO’s real estate assets, intangible assets and real estate venture investments on a relative fair value basis. All other assets
acquired and liabilities assumed were recorded at fair value. The following summarizes the accounting for the LAACO acquisition:
Storage properties
Cash and cash equivalents
Investment in real estate ventures, at equity
Assets held for sale
Other assets, net
Accounts payable, accrued expenses and other liabilities
Deferred revenue
Security deposits
Liabilities held for sale
Total
Amount
(in thousands)
1,517,243
18,291
35,737
50,435
143,599
(38,350)
(3,764)
(36)
(3,635)
1,719,520
$
$
Intangible assets (included above in Other assets, net) consisted of in-place leases, which aggregated to $109.7 million at the time of the
acquisition and prior to amortization of such amounts. The estimated life of these in-place leases is 12 months and the amortization
expense that was recognized during the years ended December 31, 2022 and 2021 was approximately $100.6 million and $9.1 million,
respectively. There was no amortization expense recognized for these in-place leases during the year ended December 31, 2023.
Other 2021 Acquisitions
During the year ended December 31, 2021, the Company acquired eight additional stores located in Florida (1), Georgia (1), Illinois (1),
Maryland (1), Nevada (1), New Jersey (1) and Pennsylvania (2) for an aggregate purchase price of approximately $140.8 million. Also, a
consolidated joint venture, in which the Company holds a 50% interest, acquired a store in Minnesota for a purchase price of $12.0
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 $11.9 million at the time of the acquisitions and prior to amortization of such amounts. The estimated life of
these in-place leases is 12 months and the amortization expense that was recognized during the years ended December 31, 2022 and 2021
F-29
was approximately $8.3 million and $3.6 million, respectively. There was no amortization expense recognized for these in-place leases
during the year ended December 31, 2023.
2021 Dispositions
During the year ended December 31, 2021, the Company sold five stores located in Colorado (1), Nevada (1), North Carolina (2) and
Texas (1) for an aggregate sales price of $43.8 million. In conjunction with the sales, the Company recorded gains that totaled $32.7
million.
5. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES
The Company’s investments in unconsolidated real estate ventures are summarized as follows (dollars in thousands):
Unconsolidated Real Estate Ventures
Fontana Self Storage, LLC ("Fontana") (1)
Rancho Cucamonga Self Storage, LLC ("RCSS") (1)
191 V CUBE LLC ("HVP V")
191 IV CUBE LLC ("HVP IV")
CUBE HHF Northeast Venture LLC ("HHFNE")
CUBE HHF Limited Partnership ("HHF")
CubeSmart
Ownership
Number of Stores as of
December 31,
Interest
50%
50%
20%
20%
10%
50%
2023
1
1
6
28
13
28
77
2022
1
1
6
28
13
28
77
$
$
Carrying Value of Investment as of
December 31,
2023
2022
$
13,575
20,679
12,759
17,085
951
33,239
98,288 $
13,789
20,994
14,318
19,853
1,101
35,938
105,993
(1) On December 9, 2021, the Company completed the acquisition of LAACO, which included a 50% interest in Fontana and RCSS,
each of which owns one self-storage property in California. As of the date of acquisition, the Company recognized differences
between the Company’s equity investment in Fontana and RCSS and the underlying equity reflected at the venture level. As of
December 31, 2023, this difference was $12.8 million for Fontana and $19.0 million for RCSS. These differences are being
amortized over the expected useful life of the self-storage properties owned by the ventures.
As of December 31, 2023, the Company also held a 10% interest in 191 IV CUBE Southeast LLC ("HVPSE"). On August 30, 2022,
HVPSE sold all 14 of its stores to an unaffiliated third-party buyer for an aggregate sales price of $235.0 million. During the year ended
December 31, 2023, the Company received distributions of $1.7 million in excess of its investment in HVPSE from proceeds that were
held back at the time of the sale. These distributions are included in Equity in earnings of real estate ventures within the Company’s
consolidated statements of operations. As of December 31, 2023, HVPSE had no assets or liabilities.
The Company determined that Fontana, RCSS, HVP V, HVPSE, HVP IV, HHFNE and HHF (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. 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 of real estate ventures within the Company’s consolidated statements of
operations.
F-30
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, 2023 and 2022:
Assets
Storage properties, net
Other assets
Total assets
Liabilities and equity
Debt
Other liabilities
Equity
CubeSmart
Joint venture partners
Total liabilities and equity
December 31,
2023
2022
(in thousands)
$
$
715,142 $
10,382
725,524 $
$
470,573 $
18,557
66,446
169,948
725,524 $
$
741,563
11,708
753,271
468,783
16,626
73,289
194,573
753,271
The following is a summary of results of operations of the Ventures for the years ended December 31, 2023, 2022, and 2021:
Total revenues
Operating expenses
Other expenses
Interest expense, net
Depreciation and amortization
Gains from sale of real estate, net
Net income
Company’s share of net income
6. UNSECURED SENIOR NOTES
2023
For the year ended December 31,
2022
(in thousands)
2021
$
$
$
99,442 $
(40,677)
(347)
(17,189)
(30,607)
—
10,622 $
6,085 $
102,910 $
(42,408)
(484)
(15,568)
(36,866)
114,107
121,691 $
48,877 $
88,449
(37,967)
(1,138)
(12,031)
(37,805)
46,966
46,474
25,275
The Company’s unsecured senior notes are summarized as follows (collectively referred to as the “Senior Notes”):
Unsecured Senior Notes
$300M 4.000% Guaranteed Notes due 2025 (1)
$300M 3.125% Guaranteed Notes due 2026
$550M 2.250% Guaranteed Notes due 2028
$350M 4.375% Guaranteed Notes due 2029
$350M 3.000% Guaranteed Notes due 2030
$450M 2.000% Guaranteed Notes due 2031
$500M 2.500% Guaranteed Notes due 2032
Principal balance outstanding
Less: Discount on issuance of unsecured senior notes, net
Less: Loan procurement costs, net
Total unsecured senior notes, net
December 31,
Effective
2023
2022
Interest Rate
Issuance
Date
Maturity
Date
(in thousands)
$
$
300,000
300,000
550,000
350,000
350,000
450,000
500,000
2,800,000
(10,148)
(13,362)
300,000
300,000
550,000
350,000
350,000
450,000
500,000
2,800,000
(11,801)
(15,849)
$ 2,776,490 $ 2,772,350
3.99 % Various (1)
3.18 % Aug-16
2.33 % Nov-21
Jan-19
4.46 %
Oct-19
3.04 %
2.10 %
Oct-20
2.59 % Nov-21
Nov-25
Sep-26
Dec-28
Feb-29
Feb-30
Feb-31
Feb-32
(1) 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%.
F-31
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, 2023, the
Operating Partnership was in compliance with all of the financial covenants under the Senior Notes.
7. REVOLVING CREDIT FACILITY
On December 9, 2011, the Company entered into a credit agreement (the “Credit Facility”), which was subsequently amended and
restated. On October 26, 2022, the Company again amended and restated, in its entirety, the Credit Facility (the “Second Amended and
Restated Credit Facility”) which, subsequent to the amendment and restatement, is comprised of an $850.0 million unsecured revolving
credit facility (the “Revolver”) maturing on February 15, 2027. Under the Second Amended and Restated Credit Facility, pricing on the
Revolver is dependent upon the Company’s unsecured debt credit ratings and leverage levels. At the Company’s current unsecured debt
credit ratings and leverage levels, amounts drawn under the Revolver are priced using a margin of 0.775% plus a facility fee of 0.15% over
the Secured Overnight Financing Rate (“SOFR”) and a 0.10% SOFR adjustment.
As of December 31, 2023, borrowings under the Revolver had an interest rate of 6.41%. Additionally, as of December 31, 2023, $831.3
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 Second 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, 2023, the Operating
Partnership was in compliance with all financial covenants of the Second Amended and Restated Credit Facility.
8. MORTGAGE LOANS AND NOTES PAYABLE
The Company’s mortgage loans and notes payable are summarized as follows:
Mortgage Loans and Notes Payable
Nashville V, TN (1)
New York, NY (1)
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
(1) These mortgage loans were repaid in full in June 2023.
Carrying Value as of
December 31,
2023
2022
$
(in thousands)
—
—
4,703
14,746
11,946
17,834
17,839
54,300
121,368
7,689
(871)
128,186 $
2,148
28,669
4,906
15,093
12,270
18,283
18,290
54,300
153,959
10,228
(1,269)
162,918
$
$
Effective
Interest Rate
Maturity
Date
3.85 %
3.51 %
3.78 %
2.15 %
2.15 %
2.25 %
2.25 %
2.15 %
Jun-23
Jun-23
May-24
May-24
May-24
Jul-26
Aug-26
Jul-29
F-32
As of December 31, 2023 and 2022, the Company’s mortgage loans and notes payable were secured by certain of its self-storage
properties with net book values of approximately $356.1 million and $442.9 million, respectively. The following table represents the
future principal payment requirements on the outstanding mortgage loans and notes payable as of December 31, 2023 (in thousands):
2024
2025
2026
2027
2028
2029
Total principal payments
$
$
32,329
979
33,760
—
—
54,300
121,368
9. ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss represents unrealized losses on interest rate swaps (see note 10). The following table
summarizes the changes in accumulated other comprehensive loss for the years ended December 31, 2023 and 2022.
Beginning balance
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,
2023
2022
(in thousands)
(494)
81
(413)
2
(411)
$
$
(575)
81
(494)
3
(491)
The Company is exposed to credit risk with regard to its cash accounts. The Company holds deposits at certain financial institutions in
excess of Federal Deposit Insurance Corporation limits. The Company's cash accounts are held with major financial institutions and
management believes that the risk of loss due to disruption at these financial institutions is low.
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 within its consolidated statements of
operations realized and unrealized gains and losses with respect to the derivative. As of December 31, 2023 and 2022, 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 Company’s consolidated balance sheets
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
F-33
affected earnings. On January 24, 2019, in conjunction with the issuance of $300.0 million of outstanding 4.375% senior notes due 2029
(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 2023. The Company estimates that $0.1 million will
be reclassified as an increase to interest expense during 2024.
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.
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.
The fair values of financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, other financial
instruments included in other assets, accounts payable, accrued expenses and other liabilities approximate their respective carrying values
at December 31, 2023 and 2022.
The following table summarizes the carrying value and estimated fair value of the Company’s debt as of December 31, 2023 and 2022:
Carrying value
Fair value
$
December 31, 2023
December 31, 2022
(in thousands)
$
2,922,776
2,631,221
2,996,168
2,568,103
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, 2023 and 2022. 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.
F-34
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.
All consolidated joint ventures were formed to develop, own and operate new stores with the exception of Anoka, which was formed to
acquire an existing store that had commenced operations. The following table summarizes the Company’s consolidated joint ventures,
each of which are accounted for as VIEs:
Consolidated Joint Ventures
New Rochelle Investors, LLC ("New Rochelle")
1074 Raritan Road, LLC ("Clark")
350 Main Street, LLC ("Port Chester")
Astoria Investors, LLC ("Astoria")
CS Lock Up Anoka, LLC ("Anoka")
CS Valley Forge Village Storage, LLC ("VFV")
CS Vienna, LLC ("Vienna")
SH3, LLC ("SH3")
Number
of Stores
CubeSmart
Ownership
Interest
Total
Assets
December 31, 2023
Total
Liabilities
(in thousands)
Related Party
Loans (1)
1
1
1
1
1
1
1
1
8
70%
90%
90%
70%
50%
70%
80%
90%
$
$
$
23,732
12,556
5,860
42,168
10,330
20,319
30,504
37,122
182,591 $
283 $
6,344
15
27,636
5,585
15,859
35,157
272
91,151 $
—
4,924
—
25,164
5,540
15,771
34,875
—
86,274
(1) Related party loans represent amounts payable from the joint venture to the Company and are included in total liabilities within
the table above. The loans and related party interest have been eliminated for consolidation purposes.
Operating Partnership Ownership
During the years ended December 31, 2023, 2022 and 2021, 126,087, 475,046 and 5,519,233 OP Units, respectively, were redeemed for
common shares of the Company.
As of December 31, 2023 and 2022, 1,300,462 and 1,426,549 OP Units, respectively, were owned by third parties. The per unit cash
redemption amount of the outstanding OP Units owned by third parties 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, 2023 and 2022. The aggregate redemption value
of the 1,300,462 OP Units owned by third parties as of December 31, 2023 was $60.3 million.
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, subject to such laws and regulations, 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, 2023, 2022
and 2021, administrative and late fees totaled $30.0 million, $27.8 million, and $21.3 million, respectively, and are included in Other
property related income within the Company’s consolidated statements of operations.
F-35
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 41 years. Certain of the Company’s leases (1) provide for one or more options to renew, with renewal options that can
extend the lease 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
operating 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 regarding the Company’s unsecured borrowing rates and implied secured spread at the lease commencement date in determining
the 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, 2023, 2022 and 2021, 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 costs
Cash paid for amounts included in measurement of lease liabilities:
Operating cash outflows for finance leases
Operating cash outflows for operating leases
Total cash outflows for lease liability measurement
2023
Year Ended December 31,
2022
(in thousands)
2021
$
$
$
$
$
964
2,138
3,064
1,375
7,541 $
$
2,183
2,601
4,784 $
$
964
2,140
2,980
868
6,952 $
$
2,183
2,453
4,636 $
964
2,139
3,278
1,173
7,554
1,938
2,513
4,451
(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.
F-36
The following table represents supplemental balance sheet information related to leases as of December 31, 2023 and 2022:
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,
2023
2022
(dollars in thousands)
41,945
65,714
$
$
41,945
65,758
50,476
50,324
$
$
49,491
48,664
$
$
$
$
40.5
32.0
41.5
33.3
3.25 %
4.52 %
3.25 %
4.44 %
The following table represents the future lease liability maturities as of December 31, 2023 (in thousands):
2024
2025
2026
2027
2028
2029 and thereafter
Total lease payments
Less: Imputed interest
Present value of lease liabilities
Finance
Operating
$
$
2,183 $
2,224
2,334
2,371
2,371
115,855
127,338
(61,624)
65,714
$
2,536
2,524
2,587
2,618
2,649
86,718
99,632
(49,308)
50,324
As of December 31, 2023, the Company has not entered into any lease agreements that are set to commence in the future.
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, 2023, 2022 and 2021 were
$4.8 million, $5.1 million and $4.9 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 $18.0 million and $15.9 million as of December 31, 2023 and 2022,
respectively, and are included in Other Assets, net on the Company’s consolidated balance sheets. Additionally, the Company had
outstanding mortgage loans receivable from consolidated joint ventures of $86.3 million and $64.4 million as of December 31, 2023 and
2022, respectively, which are eliminated for consolidation purposes. The Company believes that all of these related-party receivables are
fully collectible.
The HVP V, HVPSE, HVP IV and HHFNE operating agreements provide for acquisition, disposition and other fees payable from HVP
V, HVPSE, HVP IV and HHFNE to the Company upon the closing of a property transaction by HVP V, 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,
2022 and 2021, the Company recognized $0.6 million and $1.3 million, respectively, in fees associated with property transactions. No
F-37
such fees were recognized during the year ended December 31, 2023. Property transaction fees are included in the component of other
(expense) income designated as Other within the Company’s consolidated statements of operations.
In April 2022, the Company began serving as lessor in a ground lease related to land underlying an HVP IV property located in Texas
(see note 4). During the years ended December 31, 2023 and 2022, the Company recognized income associated with this ground lease of
$0.4 million and $0.2 million, respectively. This income is included in the component of other (expense) income designated as Other
within the Company’s consolidated statements of operations.
15. COMMITMENTS AND CONTINGENCIES
Development Commitments
The Company has agreements with developers for the construction of four new self-storage properties (see note 4), which will require
payments of approximately $43.0 million, due in installments upon completion of certain construction milestones, during 2024 and 2025.
Litigation
From time to time, the Company is involved in claims 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
The Company has a share-based compensation plan (the “Plan”) which it utilizes to compensate certain employees and non-employee
Trustees. The Plan was last amended and restated in 2016. The Plan provides for the grant of share options, share appreciation rights,
restricted shares, performance units, which may be denominated in cash or shares, including 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. Share options granted under the Plan may be non-qualified share options or incentive share options.
Upon shareholder approval of the amendment and restatement of the Plan on June 1, 2016, 4,500,000 additional common shares were
made available for award under the Plan. As a result, these 4,500,000 additional shares, together with the 991,117 shares that remained
available for future awards under the 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 Reserve”. As of
December 31, 2023: (i) 1,332,836 common shares remained available for future awards under the Plan; (ii) 360,529 unvested restricted
share awards were outstanding under the Plan; and (iii) 2,763,159 common shares were subject to outstanding options under the Plan.
The Plan is administered by the Compensation Committee of the Board (the “Compensation Committee”). The Compensation
Committee interprets the Plan and, subject to its right to delegate authority to grant awards, determines the terms and provisions of option
grants and share awards.
Under the Plan, the Compensation Committee determines the vesting schedule of each award, subject to a one-year minimum vesting
requirement for share options, share appreciation rights, and certain restricted share and restricted share unit awards, 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.
Share Options
The fair values for options granted in 2023, 2022 and 2021 were estimated at the time the options were granted using the Black-Scholes
option-pricing model applying the following weighted average assumptions:
F-38
Assumptions:
2023
2022
2021
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
share
Term
4.1 %
4.1 %
26.00 %
6.0 years
1.5 %
3.7 %
25.00 %
6.0 years
0.6 %
3.8 %
25.00 %
6.0 years
$
7.90
10.0 years
$
8.83
10.0 years
$
4.62
10.0 years
(1) Expected volatility is based upon the Company’s historical daily share prices.
(2) The expected life is based on the contractual term of the options as well as the weighted average vesting period.
In 2023, 2022 and 2021, the Company recognized compensation expense related to options issued to employees and executives of
approximately $2.8 million, $2.5 million and $2.3 million, respectively, which is included in General and administrative expense within
the Company’s consolidated statements of operations. The share options vest ratably over three years. As of December 31, 2023, the
Company had approximately $3.0 million of unrecognized option compensation cost related to all grants that will be recognized over a
weighted average period of 1.7 years.
The table below summarizes the option activity under the Plan for the year ended December 31, 2023:
Balance at December 31, 2022
Options granted
Options canceled
Options exercised
Balance at December 31, 2023
Vested or expected to vest at December 31, 2023
Exercisable at December 31, 2023
Weighted Average
Strike Price
Weighted Average
Remaining
Contractual Term
(Years)
33.10
40.25
44.17
18.83
34.75
34.75
31.40
6.21
9.00
8.44
1.66
5.95
5.95
5.02
Options
2,537,038 $
408,650
(38,296)
(144,233)
2,763,159 $
2,763,159 $
1,972,708 $
As of December 31, 2023, the aggregate intrinsic value of options that were exercisable was approximately $30.6 million. As of that
date, the aggregate intrinsic value of options that had vested or were expected to vest was approximately $35.3 million. The aggregate
intrinsic value of options exercised was approximately $3.9 million, $1.0 million and $10.6 million for the years ended December 31,
2023, 2022 and 2021, respectively.
Restricted Shares & Performance Units
During 2023, 2022 and 2021 the Company granted restricted shares to employees and Trustees and also granted performance units to
certain executives.
The fair values for restricted share awards made under the Plan were valued at the grant date fair value, which is the market price of the
underlying common shares. The shares vest over either a 3-year or 5-year period beginning with the first anniversary of the grant.
Performance units represent the right to earn common shares. The performance 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 performance units are 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 performance units cliff vest upon the third anniversary of the effective date. The Company used a Monte Carlo simulation
analysis to estimate the fair value of the awards, the key assumptions of which are as follows:
Assumptions:
Risk-free interest rate
Volatility (1)
2023
4.2 %
32.00 %
2022
1.0 %
28.00 %
2021
0.2 %
28.00 %
(1) Expected volatility is based upon the Company’s historical daily share prices.
F-39
During the years ended December 31, 2023, 2022 and 2021, the Company recognized compensation expense related to restricted shares
and performance units of approximately $7.3 million, $6.5 million and $5.8 million, respectively, which is included in General and
administrative expense within the Company’s consolidated statements of operations. The following table presents non-vested restricted
share and performance unit activity under the Plan for the year ended December 31, 2023:
Non-Vested at January 1, 2023
Granted
Vested
Forfeited
Non-Vested at December 31, 2023
Number of Non-
Vested Restricted
Shares and Performance Units
340,952
190,540
(155,468)
(15,495)
360,529
The weighted average fair value of restricted shares and performance units granted during the years ended December 31, 2023, 2022 and
2021 was $46.94, $61.41 and $39.37, respectively. The total fair value of restricted shares and performance units vested during the years
ended December 31, 2023, 2022 and 2021 was $6.1 million, $5.6 million and $4.8 million, respectively. As of December 31, 2023 the
Company had approximately $8.5 million of remaining unrecognized restricted share and performance unit compensation costs that are
expected to be recognized over a weighted average period of 2.1 years.
17. EARNINGS PER SHARE AND UNIT AND SHAREHOLDERS’ EQUITY AND CAPITAL
Earnings per share and shareholders’ equity
The following is a summary of the elements used in calculating basic and diluted earnings per share:
Net income
Noncontrolling interests in the Operating Partnership
Noncontrolling interests in subsidiaries
$
Net income attributable to the Company’s common shareholders
$
Weighted average basic shares outstanding
Share options and restricted share units
Weighted average diluted shares outstanding (1)
For the year ended December 31,
2023
2022
2021
(dollars and shares in thousands, except per share amounts)
412,435
(2,535)
857
410,757
$
$
292,472
(1,931)
722
291,263
$
$
225,424
817
226,241
224,928
953
225,881
230,813
(7,873)
542
223,482
203,832
1,177
205,009
Basic earnings per share attributable to common shareholders
Diluted earnings per share attributable to common shareholders (2)
$
$
1.82
1.82
$
$
1.29
1.29
$
$
1.10
1.09
Income allocated to noncontrolling interests of the Operating Partnership has been excluded from the numerator and OP Units owned by
third parties have been omitted from the denominator for the purpose of computing diluted earnings per share since the effect of including
these amounts in the numerator and denominator would be anti-dilutive. Weighted average outstanding OP Units owned by third parties
for the years ended December 31, 2023, 2022 and 2021 were 1.4 million, 1.5 million and 7.1 million, respectively.
F-40
Earnings per unit and capital
The following is a summary of the elements used in calculating basic and diluted earnings per unit:
For the year ended December 31,
Net income
Noncontrolling interests in subsidiaries
Net income attributable to CubeSmart, L.P.
Weighted average basic units outstanding (3)
Unit options and restricted share units
Weighted average diluted units outstanding (1) (3)
$
$
2022
2023
2021
(dollars and units in thousands, except per unit amounts)
412,435
857
413,292
292,472
722
293,194
$
$
$
$
230,813
542
231,355
226,817
817
227,634
226,449
953
227,402
210,949
1,177
212,126
1.10
1.09
Basic earnings per unit attributable to CubeSmart, L.P.
Diluted earnings per unit attributable to CubeSmart, L.P. (2)
$
$
1.82
1.82
$
$
1.29
1.29
$
$
(1) For the years ended December 31, 2023, 2022 and 2021, the Company declared cash dividends per common share/unit of $1.98,
$1.78 and $1.45, respectively.
(2) The amounts of anti-dilutive options that were excluded from the computation of diluted earnings per share/unit for the years
ended December 31, 2023 and 2022 were 0.7 million and 0.3 million, respectively. There were no anti-dilutive options for the
year ended December 31, 2021.
(3) Prior period amounts have been updated to conform to current year presentation.
The OP Units owned by the General Partner and the OP Units owned by third parties have essentially the same economic characteristics
as they share equally in the total net income or loss and distributions of the Operating Partnership. OP Units owned by third parties may be
redeemed for cash, or at the Company’s option, common shares of CubeSmart on a one-for-one basis. The following is a summary of OP
Units outstanding:
Outstanding OP Units owned by third parties
Outstanding OP Units owned by the General Partner
Common Shares
2023
1,300,462
224,921,053
As of December 31,
2022
1,426,549
224,603,462
2021
1,901,595
223,917,993
On November 19, 2021, the Company closed an underwritten offering of 15.5 million common shares at a public offering price of
$51.00 per share, resulting in net proceeds of $765.6 million, after deducting offering costs.
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, 2023, 2022 and 2021 is summarized below:
Number of shares sold
Average sales price per share
Net proceeds after deducting offering costs
$
$
2023
For the year ended December 31,
2022
(dollars and shares in thousands, except per share amounts)
4,982
40.57
199,977
102
50.64 $
4,936 $
—
— $
— $
2021
The proceeds from the sales of common shares under the program during the years ended December 31, 2022 and 2021 were used to
fund the acquisition and development of self-storage properties and for general corporate purposes. As of December 31, 2023, 2022 and
2021, 5.8 million common shares, 5.8 million common shares and 5.9 million common shares, respectively, remained available for
issuance under the Equity Distribution Agreements.
F-41
18. SUBSEQUENT EVENTS
Subsequent to December 31, 2023, the Company acquired a two-store portfolio located in Connecticut for a purchase price of $20.2
million.
F-42
CUBESMART
SCHEDULE III
REAL ESTATE AND RELATED DEPRECIATION
December 31, 2023
(dollars in thousands)
State
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
Virginia
Washington D.C.
Other Corporate Assets
Number of
Stores
Total
Rentable
Square Feet
(unaudited)
48
63
10
22
90
22
42
1
20
20
2
22
29
3
59
9
20
12
4
8
9
76
4
11
5
—
611
3,092,942
4,786,036
654,202
1,200,207
6,787,173
1,657,228
2,710,345
70,386
1,684,502
1,253,278
175,916
1,706,489
2,058,007
182,261
4,722,118
611,773
1,294,303
890,698
247,305
432,324
756,020
5,447,787
239,388
1,060,440
410,676
—
44,131,804
$
Encumbrances
—
—
—
—
—
—
—
—
4,703
—
—
—
—
—
116,665
—
—
—
—
—
—
—
—
—
—
—
121,368
$
Initial Cost
Land
98,442
371,460
11,812
22,023
104,987
20,015
52,723
1,134
40,467
31,948
2,621
69,956
50,194
2,866
427,921
10,349
13,529
18,177
3,480
6,117
9,117
110,252
10,763
37,282
28,759
2,071
1,558,465
$
$
$
Buildings
&
Improvements
389,514
683,683
46,755
82,375
531,360
117,825
219,307
5,589
214,985
159,000
21,655
394,023
203,710
9,367
1,331,857
44,680
51,265
95,559
17,156
31,039
54,403
476,749
2,844
138,668
80,996
13,294
5,417,658
$
Costs
Subsequent
to
$
Acquisition
27,444
38,549
4,694
21,345
96,582
11,719
31,381
255
15,001
12,636
434
6,933
38,759
2,008
59,471
6,716
18,472
11,070
1,704
1,502
6,343
37,262
2,885
4,992
2,564
1,692
462,413
$
$
$
$
$
Land
Gross Carrying Amount at
December 31,2023
Buildings
&
Improvements
400,450
664,396
45,062
87,502
551,408
117,027
225,813
5,838
217,309
165,719
22,050
398,853
222,218
8,110
1,358,515
47,568
54,757
101,174
18,801
32,541
53,032
487,356
4,187
136,406
77,512
13,940
5,517,544
99,493
373,301
11,786
23,570
112,652
19,826
52,619
1,134
41,323
32,200
2,621
71,704
53,706
2,867
444,147
10,787
14,937
18,131
3,481
6,117
8,991
110,569
10,623
37,283
28,802
2,072
1,594,742
$
$
Accumulated
Depreciation
Total
499,943
1,037,697
56,848
111,072
664,060
136,853
278,432
6,972
258,632
197,919
24,671
470,557
275,924
10,977
1,802,662
58,355
69,694
119,305
22,282
38,658
62,023
597,925
14,810
173,689
106,314
16,012
7,112,286
$
$
(A)
60,754
116,504
14,871
37,274
190,501
34,046
77,211
1,759
56,982
37,799
3,359
33,057
71,436
3,656
334,413
14,783
23,175
24,254
5,493
4,349
15,759
118,240
2,068
37,307
18,842
3,721
1,341,613
(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-43
Activity in storage properties during the period from January 1, 2021 through December 31, 2023 was as follows (in thousands):
Storage properties*
Balance at beginning of year
Acquisitions & improvements
Fully depreciated assets
Dispositions and other
Construction in progress, net
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
2023
2022
2021
7,295,778 $
74,259
(29,133)
(4,717)
31,426
7,367,613 $
7,183,494 $
191,495
(32,344)
(6,230)
(40,637)
7,295,778 $
5,489,754
1,795,965
(52,722)
(19,408)
(30,095)
7,183,494
1,247,775 $
199,065
(29,133)
(1,330)
1,416,377 $
5,951,236 $
1,085,824 $
195,522
(32,344)
(1,227)
1,247,775 $
6,048,003 $
983,940
160,933
(52,722)
(6,327)
1,085,824
6,097,670
$
$
$
$
$
* These amounts include equipment that is housed at the Company’s stores which is excluded from Schedule III above.
As of December 31, 2023, the aggregate cost of Storage properties for federal income tax purposes was approximately $7,719.6 million.
F-44
EXECUTIVE OFFICERS
Christopher P. Marr
President & Chief Executive Officer
CORPORATE INFORMATION
Transfer Agent
Equiniti Trust Company, LLC
Timothy M. Martin
Chief Financial Officer & Treasurer
Newark, NJ 07101
800.937.5449
PO Box 500
Investor Relations
5 Old Lancaster Road
Malvern, PA 19355
610.535.5000
Jeffrey P. Foster
Stock Listing
Chief Legal Officer & Secretary
Joel D. Keaton
Chief Operating Officer
Jennifer L. Schulte
Chief Human Resources Officer
CubeSmart trades on the New
York Stock Exchange under the
symbol CUBE
Annual Meeting
The annual meeting of
shareholders will be held at
5 Old Lancaster Road
Malvern, PA 19355
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:
Investor Relations
5 Old Lancaster Road
Malvern, PA 19355
on May 21, 2024 at 8:00 A.M.
610.535.5000
Eastern Time
Corporate Headquarters
5 Old Lancaster Road
Malvern, PA 19355
Internet
Financial statements and other
information are available
electronically on CubeSmart's
investor website at
investors.cubesmart.com
BOARD OF TRUSTEES
Deborah R. Salzberg
Chair of the Board
Principal,
Uplands Real Estate Partners
Christopher P. Marr
President & Chief Executive Officer,
CubeSmart
Piero Bussani
Chief Legal Officer,
Homebound.com
Jit Kee Chin
Chief Data and Innovation Officer,
Suffolk Construction Corporation
Dorothy Dowling
Managing Director,
Horwath HTL
John W. Fain
Senior Vice President,
Sales and Marketing (retired),
UPS Freight
Jair K. Lynch
Chief Executive Officer,
Jair Lynch Real Estate Partners
John F. Remondi
Former President, Chief Executive
Officer & Director,
Navient
Jeffrey F. Rogatz
Managing Director,
Robert W. Baird & Co.
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 timely 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, 2023, 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. Risk, uncertainties and other factors that might cause such differences, some of which could be material, include but are not limited to:
adverse changes in economic conditions in the real estate industry and in the markets in which the Company owns and operate self-storage properties; the effect of
competition from existing and new self-storage properties and operators on the Company’s ability to maintain or raise occupancy and rental rates; the failure to
execute the Company’s business plan; adverse impacts from pandemics, quarantines and stay at home orders, including the impact on the Company’s ability to
operate its 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; increases in interest rates and operating costs; financing risks, including the risk of over-leverage and the corresponding risk of default on the
Company’s mortgage and other debt and potential inability to refinance existing or future debt; counterparty non-performance related to the use of derivative
financial instruments; risks related to the Company’s ability to maintain its 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 the Company’s joint venture partners to fulfill their obligations to the Company or their pursuit of actions that are inconsistent with
the Company’s objectives; reductions in asset valuations and related impairment charges; cybersecurity breaches, cyber or ransomware attacks or a failure of the
Company’s networks, systems or technology, which could adversely impact the Company’s business, customer and employee relationships or result in fraudulent
payments; changes in real estate, zoning, use and occupancy laws or regulations; risks related to or consequences of earthquakes, hurricanes, windstorms, floods,
other natural disasters or acts of violence, pandemics, active shooters, terrorism, insurrection or war that impact the markets in which the Company operates;
potential environmental and other material liabilities; governmental, administrative and executive orders, regulations and laws, which could adversely impact the
Company’s business operations and customer and employee relationships; uninsured or uninsurable losses and the ability to obtain insurance coverage, indemnity
or recovery from insurance against risks and losses; the Company’s 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 law.
5 Old Lancaster Road
Malvern, PA 19355
www.cubesmart.com