Repositioning AssetsSince 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 StructureCubeSmart 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).
CubeSmart maintains a flexible balance sheet strategy consisting of secured debt (16%), unsecured debt (19%), preferred equity (3%) and equity (62%). With a broad array of capital sources, CubeSmart is able to execute peak performance on its diverse portfolio consisting of smaller individual assets (not conducive to collateralization). Robust Revenue By developing a scalable self-storage brand, CubeSmart is able to maximize operational efficiencies and provide a differentiated model of revenue and profitability. As a measure of performance, CubeSmart has improved its rent per square foot profile from around $11.00 psf (in January 2008) to $12.75 psf currently. This increased revenue is directly correlated to the improved population fundamentals and the repositioning of certain assets and focus on "core" densely populated markets. In 2008 (January), CubeSmart operated facilities in trade areas with roughly 100,000 people in a 3-mile radius and currently CubeSmart owns facilities where the average 3-mile population is closer to 225,000 people. Roughly 60% of CubeSmart's portfolio NOI is generated from "core" markets -- up from 42% in early 2008. Here is a snapshot of CubeSmart's historical revenues from 2007-2011:
Analysts project CubeSmart revenue to top $275 million this year and, as noted above, the REIT's strategic asset repositioning initiatives and the company's increased third-party management platform should enhance funds from operations. Analysts suggest 2012 FFO estimates of between 70 cents to 73 cents per share. The current dividend yield is 2.7% and the current price is $11.84 per share (52-week high was $12.93 on May 1, 2012). Analysts' NAV estimates range from $10.16 to $12.50 per share and BOA Merrill Lynch and KeyBanc Capital Markets both recommend buy ratings while analysts at BMO Capital Markets recommend outperform ratings. Robert Baird recommends a neutral rating. According to NAREIT , the self-storage sector consists of four REITs with a combined market capitalization of $30.61 billion and an average dividend yield for the sector of 3.01% (compared with 3.29% for the entire equity REIT sector).