Gleaming the CubeSmart: Preferred Shares Eyed

NEW YORK (TheStreet) -- In an industry that remains widely fragmented, the self-storage sector consists of 46,500 U.S. facilities, says the Self Storage Association fact sheet. Four publicly owned REITs control around 10% of the sector. Those REITs are Public Storage (PSA), Extra Space Storage (EXR), CubeSmart (CUBE) and Sovran Self Storage (SSS).

In an age driven by Internet commerce, many of the leading storage REITs have developed sophisticated technologies to gain competitive advantages. The goal here is to foster consistent customer engagement. New technologies allow operators to capture customers from a variety of e-commerce points and sales centers.

The more sophisticated operators have created strategic operational platforms that enable consumers to choose a relevant brand that is based upon unique services or facilities. One such REIT that is gaining broad recognition as a differentiated storage brand, as well as a unique investment alternative, is CubeSmart.

Based in Wayne, PA and operating across the U.S., CubeSmart is the fourth-largest self-storage REIT. With around $1.94 billion in assets, CubeSmart owns about 376 facilities and manages (for third-parties) another 102 facilities. The portfolio is coast-to-coast, with the largest concentration of facilities in Florida (16.6%).

Repositioning Assets

Since 2008, CubeSmart has disposed of roughly $234 million in lower-growth (tertiary markets) assets and the proceeds have been strategically deployed into more attractive higher-growth "core" market facilities. Since 2008, CubeSmart has acquired around $265 million of "core" properties. In addition, CubeSmart closed (first pool closed on Nov. 3, 2011) on a large portfolio (Storage Deluxe Portfolio) of around 22 assets (1.6 million square feet) predominantly located in the Greater New York City area.

As of March 31, 2012, CubeSmart has closed on one asset in Houston and one in Atlanta for a total of $12 million. Acquisition guidance for 2012 is from $75 to $125 million and targeted dispositions range from $35 million to $50 million.

Conservative Capital Structure

CubeSmart was recently (December 20) rated BBB- (investment grade) by S&P and Baa3 by Moody's. CubeSmart has improved its balance sheet considerably as the company's debt/gross assets have gone from 51% in 2008 (Dec. 31) to 37% in 2012 (March 31).

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