Executive Summary / Key Takeaways

• Operational Rebound: CubeSmart is demonstrating a compelling operational rebound, with key performance indicators exceeding expectations and showing stabilizing trends in occupancy and new customer rental rates, particularly through Q2 2025 and into July.
• Strategic Acquisitions & Portfolio Enhancement: The company is actively consolidating high-quality assets, notably acquiring the remaining 80% interest in the HVP IV venture and the Hines Portfolio, which are accretive and strategically complementary to its existing footprint.
• Disciplined Capital Allocation: Despite market uncertainties, CubeSmart maintains a strong balance sheet with ample liquidity and capacity for external growth, prioritizing disciplined acquisitions that offer compelling risk-adjusted returns.
• Technology-Driven Efficiency: A sophisticated, data-driven platform underpins CubeSmart's revenue management and operational efficiency, enabling precise pricing, optimized marketing spend, and sector-leading expense controls.
• Cautious but Confident Outlook: Management's 2025 guidance reflects prudent caution regarding the broader economic and housing environment, yet expresses increasing confidence in sustained operational improvement through the year, setting a strong foundation for 2026.

The CubeSmart Blueprint: Resilience Through Strategic Operations

CubeSmart stands as a prominent self-storage real estate investment trust, operating through a self-managed and self-administered umbrella partnership (UPREIT) structure. This model allows the Parent Company, as the sole general partner of CubeSmart, L.P., to hold substantially all assets and conduct operations, ensuring unified management and strategic alignment. The company's core business revolves around the ownership, operation, development, management, and acquisition of self-storage properties, providing essential, need-based storage solutions for a diverse customer base spanning residential and commercial needs.

The company's history, marked by its 20th anniversary as a NYSE-traded entity, underscores a consistent commitment to strategic growth and shareholder value. Early initiatives included a share repurchase program and the formation of joint ventures like HVP IV in 2017 to acquire non-stabilized, lease-up stores. This foundational approach, coupled with a disciplined financial strategy that included managing interest rate risks through swaps and amending its revolving credit facility to an $850 million line, has shaped its current robust market position.

In the competitive self-storage landscape, CubeSmart positions itself as a top-tier operator alongside industry giants like Public Storage (PSA) and Extra Space Storage (EXR), while also competing with regional players such as National Storage Affiliates (NSA). CubeSmart's self-managed structure provides a qualitative edge in decision-making speed and cost control, potentially leading to more efficient resource allocation compared to EXR's partnership-reliant model. While PSA often benefits from its sheer scale, leading to strong profitability margins, CubeSmart's agility and customer-focused innovations, such as user-friendly digital platforms, offer a qualitatively superior customer experience. Against NSA's decentralized model, CubeSmart's centralized self-management allows for potentially stronger operational execution.

A key differentiator for CubeSmart is its sophisticated, data-driven technological platform. This is not a single piece of hardware but an integrated system of centralized marketing, advanced revenue management, and operational support. The company leverages data analytics to inform its pricing strategies, including its Existing Customer Rate Increase (ECRI) program, ensuring a balance between customer service and revenue maximization. This data-driven approach enables quick and effective responses to local market conditions, optimizing rental rates and occupancy levels. Furthermore, efficiency-focused projects, including staffing and telecom initiatives, are driven by this platform to reduce repetitive tasks and control property operating expenses. While traditional internet searches remain the primary driver of traffic, CubeSmart's marketing team actively monitors and adapts to the evolving landscape of AI and large language models (LLMs) to maintain its competitive edge in customer acquisition. This technological backbone contributes significantly to CubeSmart's competitive moat, enhancing its ability to maximize revenue, control costs, and solidify its market positioning.

Operational Momentum: From Stabilization to Gradual Recovery

CubeSmart's recent financial performance reflects a business steadily emerging from a period of market volatility. For the three months ended June 30, 2025, total revenues increased by $16.1 million, or 6.0%, to $282.3 million, primarily driven by contributions from recently acquired and developed properties. This top-line growth, however, was accompanied by a 7.1% increase in property operating expenses and a significant 30.3% rise in depreciation and amortization, largely due to the expanded asset base. Consequently, net income for the quarter decreased by 12.5% year-over-year to $82.4 million.

Despite these shifts, operational metrics signal a positive trajectory. Trough-to-peak occupancy grew by 190 basis points in Q2 2025, surpassing the 180 basis points seen last year. Net effective rates for new customers also showed robust growth, increasing by 28.3% in Q2 2025 compared to 15% in 2024. The year-over-year gap in move-in rents has consistently narrowed, improving from an 8.3% decline in Q1 2025 to a 4% decline in Q2 2025, and further to a 3.3% decline in July. This indicates a constructive pricing environment for new rentals.

Expense control remains a hallmark of CubeSmart's operations. Same-store operating expenses grew by a modest 1.2% in Q2 2025 and only 0.6% in Q1 2025, outperforming expectations. This efficiency is attributed to a better-than-anticipated insurance renewal in May, successful property tax appeals, and ongoing efficiency-focused projects. The existing customer base continues to exhibit strong health, supporting the ECRI program, which has seen consistent acceptance rates and elevated lengths of stay.

Geographically, CubeSmart's urban markets, particularly the New York MSA (including the boroughs and Long Island), continue to be top performers, demonstrating solid sequential acceleration in net rental income. These markets benefit from reduced new supply and a broad base of consumer and small business demand, which is less reliant on housing mobility. Conversely, Sunbelt markets like Florida and Arizona, while showing improving trends, remain relative laggards as they continue to absorb new supply and are more sensitive to housing transaction volumes.

Strategic Expansion and Financial Fortitude

CubeSmart's growth strategy is multifaceted, combining disciplined acquisitions, targeted development, and a robust third-party management platform. In February 2025, the company completed a significant strategic move by acquiring the remaining 80% ownership interest in the HVP IV venture for $452.8 million. This transaction consolidated 28 high-quality, early-stage lease-up stores, which were previously held as an unconsolidated joint venture. This acquisition was a long-term strategic objective, expected to be accretive and offer further growth potential as these assets fully stabilize, with an anticipated 2025 yield in the mid-to-high five percent range.

Prior to this, in December 2024, CubeSmart acquired an 85% interest in the 14-store Hines Portfolio in the Dallas MSA for approximately $157.3 million. This portfolio was deemed an excellent fit, complementing the company's existing Dallas footprint. Additionally, four other stores were acquired in Connecticut, Oregon, and Pennsylvania in 2024 for an aggregate of $42.2 million. The company also has two new self-storage properties under development in New York, with construction expected to complete in Q3 2025, representing a total projected cost of $45.7 million.

The third-party management platform continues to be a significant growth engine, adding 30 stores in Q2 2025, bringing the total to 873 stores under management. This consistent expansion, with 2024 marking the eighth consecutive year of adding 130 or more stores annually, highlights CubeSmart's brand strength and operational expertise, attracting owners seeking professional management, particularly in a challenging market.

Financially, CubeSmart maintains a strong balance sheet, providing ample capacity for future growth. As of June 30, 2025, net debt-to-EBITDA stood at 4.7x, well within its target credit metrics. The company has an $850 million unsecured revolving credit facility, with $483.1 million available for borrowing, offering significant short-term liquidity. A $300 million senior unsecured note maturity in November 2025, with a 4% coupon, is slated for refinancing, with management actively monitoring debt markets.

The company's ability to generate substantial free cash flow further supports its capital allocation flexibility, allowing it to fund acquisitions and developments without solely relying on equity issuances.

Outlook and Investment Considerations: A Cautious Ascent

CubeSmart's updated 2025 guidance reflects a blend of cautious optimism and strategic realism. Management anticipates a gradual improvement in operational metrics through the back half of 2025, positioning the company for a stronger start to 2026. The full-year FFO per share guidance for 2025 is projected to be in the range of $2.50 to $2.59, with a midpoint of $2.545. This midpoint implies a roughly 3% decline from 2024's FFO per share of $2.63, primarily driven by a projected 3% decline in same-store NOI.

The guidance is underpinned by several key assumptions. The operating environment in 2025 is expected to remain similar to the past two years, with no material changes to the "anemic housing market." However, the company projects that occupancy and move-in rates will approach parity with prior-year levels by the end of 2025, indicating a continued narrowing of negative year-over-year gaps. The impact of new supply on the same-store portfolio is expected to lessen, affecting approximately 24% of stores in 2025, down from 27% in 2024 and a peak of 50% in 2019. New construction starts are also anticipated to decline further due to elevated costs of capital, land, and labor, making new projects less economically viable.

Key risks to this outlook include ongoing consumer volatility, which could impact discretionary spending and moving trends, and persistent inflationary pressures. Localized supply absorption challenges, particularly in some Sunbelt markets, also remain a headwind. However, CubeSmart's inherent resilience, diverse customer base, and proactive expense control measures, including successful property tax appeals and favorable insurance renewals, are expected to mitigate these risks. Recent tax law changes, such as the permanent extension of the 20% deduction for qualified REIT dividends and the increased TRS asset test limit, further enhance the REIT structure's attractiveness.

Conclusion

CubeSmart's journey through a dynamic market environment underscores its foundational strength and strategic adaptability. By leveraging a self-managed, data-driven operational platform, the company has demonstrated remarkable resilience, effectively controlling expenses and optimizing revenue in a competitive landscape. Its disciplined approach to external growth, marked by accretive acquisitions and a robust third-party management business, continues to enhance its high-quality portfolio.

While the broader economic and housing markets present ongoing uncertainties, CubeSmart's improving operational trends and cautious yet confident outlook for 2025 position it for a stronger trajectory into 2026. The company's ability to consistently generate free cash flow and maintain a flexible balance sheet provides a significant competitive advantage, enabling it to capitalize on future opportunities. For investors, CubeSmart represents a compelling investment in a resilient sector, poised for continued stability and growth through strategic execution and operational excellence.