Executive Summary / Key Takeaways

• Stabilizing Fundamentals and Gradual Improvement: CubeSmart is experiencing a "slow, steady stabilization" in operational metrics, with move-in rates turning positive year-over-year in Q3 2025 for the first time since Q1 2022. Management anticipates continued gradual improvement, projecting positive same-store revenue growth in the back half of 2026.
• Robust Financial Performance in Q3 2025: The company reported a "very solid third quarter," with total revenues increasing 5.2% to $285.08 million and FFO per share as adjusted of $0.65, meeting consensus estimates. This performance led to an upward revision in full-year 2025 guidance for FFO per share and same-store NOI.
• Strategic External Growth and Portfolio Enhancement: CubeSmart continues to execute its external growth strategy, notably acquiring the remaining 80% interest in the HVP IV joint venture in February 2025, consolidating 28 high-quality properties. The company is also actively pursuing targeted acquisitions and developments, with three stores under contract in Q4 2025.
• Technological Edge in Revenue Management: CubeSmart leverages sophisticated data-driven systems for centralized marketing and revenue management, enabling dynamic pricing and occupancy optimization. This technological approach, combined with local operational teams, allows for quick adaptation to market conditions and maximizes revenue.
• Conservative Leverage and Strong Liquidity: With net debt to EBITDA at 4.7x and substantial liquidity from cash and its revolving credit facility, CubeSmart maintains a strong financial position, providing capacity for future strategic investments and debt management.

A Resilient Foundation in Self-Storage

CubeSmart (NYSE:CUBE) stands as a prominent self-storage real estate investment trust, distinguished by its self-managed and self-administered operational model. With a history spanning over four decades in the self-storage industry, the company has cultivated a culture focused on "defining creative methods to grow externally." This strategic approach has shaped its current portfolio and competitive stance. CubeSmart operates through an umbrella partnership REIT (UPREIT) structure, with the Parent Company holding a 99.50% interest in the Operating Partnership as of September 30, 2025.

The company's core business revolves around the ownership, operation, development, management, and acquisition of self-storage properties. As of September 30, 2025, CubeSmart owned or partially owned and consolidated 660 self-storage properties across 25 states and the District of Columbia, encompassing approximately 48.20 million rentable square feet. Beyond its owned portfolio, CubeSmart extends its reach through a robust third-party property management platform, managing 863 stores for other owners, bringing its total footprint to 1,523 properties. This dual approach allows CubeSmart to maximize internal growth while also generating fee income and identifying potential acquisition targets.

The self-storage industry itself is characterized by its inherent resilience, driven by a broad, need-based customer demographic. Demand stems from diverse life events—such as moving, downsizing, or remote working—and commercial needs from small businesses, tradespeople, and e-commerce sellers. While moving-related demand, historically accounting for approximately 50% of the market, has dipped due to high mortgage rates and cautious consumer behavior, overall demand remains solid. New supply, a significant headwind in prior years, is showing signs of moderation, with a forecasted downturn post-2025 after a surge in 2024 and 2025 deliveries. This easing supply pressure, coupled with long-term trends like smaller new homes and a strong rental sector, bodes well for the industry's future.

Technological Edge and Operational Acumen

CubeSmart's operational effectiveness is significantly enhanced by its sophisticated, data-driven technological platform. The company employs centralized marketing, revenue management, and operational support systems that allow for dynamic pricing and occupancy optimization. This technology enables CubeSmart to respond rapidly and effectively to changes in local market conditions, a critical advantage in the micro-market nature of self-storage.

While specific quantifiable performance metrics for its technology are not detailed (e.g., "X% lower degradation rate"), the benefits are clearly articulated. The "ever-increasing sophistication of our platform" allows CubeSmart to maximize revenues by intelligently managing rental rates and occupancy levels. This data-driven approach supports the company's ability to achieve "constructive pricing" even in challenging environments. For investors, this technological differentiation translates into a competitive moat, enabling more efficient operations, better revenue capture, and a stronger ability to adapt to market shifts compared to less technologically advanced operators. The company's focus on "efficiency-focused projects at our stores, including staffing and telecom initiatives," further underscores its commitment to leveraging technology for operational excellence.

Financial Performance and Liquidity Strength

CubeSmart delivered a "very solid third quarter" in 2025, reflecting improving operational trends. Total revenues for the three months ended September 30, 2025, increased to $285.08 million, up 5.2% from $270.89 million in the prior year period, surpassing Street forecasts. This growth was primarily driven by additional revenues from properties acquired or opened in 2024 and 2025. Rental income, the largest component, rose 5.39% year-over-year to $243.40 million for the quarter. Other property-related income also saw an 8.41% increase to $31.73 million.

Despite top-line growth, net income attributable to the company for the third quarter decreased to $82.93 million, or $0.36 per diluted share, compared to $100.80 million, or $0.44 per diluted share, in Q3 2024. Funds From Operations (FFO) per share as adjusted for the quarter was $0.65, meeting Wall Street expectations. For the nine months ended September 30, 2025, total revenues increased by $41.9 million, or 5.2%, to $840.4 million.

Operational expenses remain a key focus for management. Same-store operating expenses grew a modest 0.3% year-over-year in Q3 2025, a testament to "sector-leading expense controls" and favorable variances in utilities and property insurance. However, property operating expenses for the nine months ended September 30, 2025, increased by 8.6% to $262.8 million, largely due to newly acquired or opened stores. Depreciation and amortization also rose significantly by 25.7% to $192.3 million over the nine-month period due to new assets.

Interest expense on loans increased by 23.6% to $84.6 million for the nine months ended September 30, 2025, reflecting a higher average outstanding debt balance of $3.35 billion and increased weighted average effective interest rates (3.28% in 9M 2025 vs. 3.01% in 9M 2024).

CubeSmart maintains a robust liquidity position. As of September 30, 2025, the company held $108.40 million in cash and cash equivalents and had $849.30 million available under its $850 million Revolving Credit Facility. Cash provided by operating activities increased to $472 million for the nine months ended September 30, 2025. The company's net debt to EBITDA stood at a conservative 4.7x at quarter-end. This strong financial health and ample liquidity provide CubeSmart with the flexibility to fund recurring capital expenditures ($2 million to $7 million for the remainder of 2025), planned improvements ($2.5 million to $7.5 million), new store development ($1.5 million to $4.5 million), and manage debt maturities. In August 2025, CubeSmart strategically issued $450 million in 5.12% senior unsecured notes due 2035, with proceeds used to manage existing debt.

Strategic Growth and Competitive Positioning

CubeSmart's growth strategy is multifaceted, combining internal optimization with targeted external expansion. The company's history of "defining creative methods to grow externally" is evident in its recent activities. A significant move in February 2025 was the acquisition of the remaining 80% ownership interest in the HVP IV joint venture for $452.8 million, consolidating 28 properties into its wholly-owned portfolio. This transaction was described as "accretive" and brought a "geographically diverse recent vintage portfolio with perfect underwriting and still yet a little bit of outsized growth" potential.

The company also acquired an 85% interest in the 14-store Hines Portfolio in Dallas for approximately $157.3 million in December 2024. Development activity continues selectively, with a joint venture project in Port Chester, NY, completed in Q3 2025, and another in New Rochelle, NY, scheduled for Q4 2025. CubeSmart's third-party management platform remains a growth engine, adding 46 stores in Q3 2025, bringing the total to 863 stores under management. This segment not only generates fee income but also provides a pipeline for potential future acquisitions.

In the competitive landscape, CubeSmart operates alongside major REITs like Public Storage (PSA), Extra Space Storage (EXR), and National Storage Affiliates (NSA). CubeSmart's self-managed model offers direct control over operations, potentially fostering stronger customer trust and localized adaptability. While it may not match the sheer scale of Public Storage, CubeSmart's focus on high-quality assets in top MSAs and its "dominant brand" in key urban markets like New York City boroughs provide a distinct advantage. New York City, for instance, benefits from "nonexistent new supply impact" and a "more need-based customer," contributing to its strong performance.

Compared to Extra Space Storage, which emphasizes technological integrations for customer experience, CubeSmart's "ever-increasing sophistication of our platform" for revenue management and centralized marketing serves a similar purpose, albeit with a focus on internal operational efficiency. Against National Storage Affiliates' partner-driven model, CubeSmart's direct oversight ensures a consistent brand experience and potentially superior execution in property maintenance and customer relations.

The self-storage sector faces indirect competition from portable storage providers and digital storage solutions. However, CubeSmart's resilience, driven by its diverse customer base and operational discipline, helps mitigate these threats. Barriers to entry, such as high real estate costs and regulatory hurdles, further protect established players like CubeSmart by limiting new development, though this also favors larger, well-capitalized competitors.

Outlook and Risks

Management's outlook for CubeSmart is characterized by "prudently cautious" optimism, anticipating "continued gradual improvement in operational metrics." The company does not foresee a "catalyst for a sharp reacceleration" in organic growth for 2025, largely due to the "anemic housing market" and broader economic uncertainty. However, the "stabilizing trends" observed, including positive year-over-year move-in rates in Q3 2025, are expected to continue, leading to "improved footing heading into 2026." Management conservatively projects that positive same-store revenue growth will likely occur in the "back half of 2026."

For the full year 2025, CubeSmart updated its guidance, raising the midpoint of its FFO per share as adjusted. The revised midpoint for same-store NOI expectations is negative 1.25%, with same-store revenue growth also seeing an improved midpoint. This guidance implies negative revenue growth in Q4 2025, but with an acceleration from Q3. The high end of revenue guidance assumes a strong rental season leading to positive occupancy and rate in the back half of 2025, while the low end assumes current negative year-over-year gaps persist. Expense growth guidance improved to a revised midpoint of 1.5% for the year, driven by better-than-anticipated insurance renewals, successful property tax appeals, and efficiency initiatives.

Key risks to this outlook include adverse changes in economic conditions, intense competition from existing and new self-storage properties, and financing risks such as rising interest rates and potential over-leverage. The "risk of volatility with the consumer" due to ongoing governmental and monetary policy decisions also remains a concern. Furthermore, while new supply headwinds are diminishing overall, certain Sunbelt markets continue to experience significant deliveries, posing localized challenges. The cost of development remains elevated, and lenders are more cautious, which should constrain new supply through at least the first half of 2027.

Conclusion

CubeSmart demonstrates a compelling investment thesis rooted in its operational resilience, strategic growth initiatives, and disciplined financial management. Despite a challenging macroeconomic backdrop and a "slow, steady stabilization" in the self-storage market, the company's "very solid" Q3 2025 performance and upwardly revised guidance underscore its ability to adapt and execute. The strategic acquisition of the HVP IV portfolio and ongoing development projects enhance its high-quality asset base, while its sophisticated technological platform provides a critical competitive edge in revenue management.

While a "sharp reacceleration" in growth is not anticipated in the near term, CubeSmart is well-positioned for a gradual recovery, with positive same-store revenue growth conservatively expected in the latter half of 2026. The company's strong liquidity, conservative leverage, and consistent dividend payments further bolster its appeal for discerning investors. As the self-storage industry continues its evolution, CubeSmart's blend of operational excellence, strategic expansion, and technological prowess positions it for sustained value creation, even amidst ongoing market uncertainties.