# CubeSmart (CUBE) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from CubeSmart's 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1298675/000129867524000011/cube-20231231x10k.htm
Accession: 0001298675-24-000011
Filing date: 2024-02-29
Report date: 2023-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/CUBE/
All MD&A years: /company/CUBE/mda/
Previous year: /company/CUBE/mda/fy2022/ (FY 2022)
Next year: /company/CUBE/mda/fy2024/ (FY 2024)

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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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”.

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Overview

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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.

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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.

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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.

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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.

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We continue our focus on maximizing internal growth opportunities and selectively pursuing targeted acquisitions and developments of self-storage properties.

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We have one reportable segment: we own, operate, develop, manage and acquire self-storage properties.

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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.

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Summary of Critical Accounting Policies and Estimates

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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

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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.

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Basis of Presentation

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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.

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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.

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Self-Storage Properties

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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.

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When stores are acquired, the purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on estimated fair values. 

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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.

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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.

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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,

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(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.

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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.

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Investments in Unconsolidated Real Estate Ventures

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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.

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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.

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Results of Operations

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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.

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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.

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The following table summarizes the change in number of owned stores from January 1, 2021 through December 31, 2023:

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[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","2023","","2022","","2021"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Balance - January 1","","611","","607","","543","\u200b"],["Stores acquired","","\u2014","","1","","\u2014","\u200b"],["Stores developed","","\u2014","","\u2014","","1","\u200b"],["Stores combined (1)","\u200b","\u2014","\u200b","\u2014","\u200b","(1)","\u200b"],["Balance - March 31","","611","","608","","543","\u200b"],["Stores acquired (2)","","\u2014","","1","","2","\u200b"],["Stores developed","\u200b","\u2014","\u200b","1","\u200b","2","\u200b"],["Stores combined (1)","\u200b","\u2014","\u200b","(1)","\u200b","\u2014","\u200b"],["Balance - June 30","","611","","609","","547","\u200b"],["Stores acquired","","\u2014","","1","","2","\u200b"],["Stores developed","\u200b","\u2014","\u200b","1","\u200b","\u2014","\u200b"],["Stores sold","\u200b","\u2014","\u200b","\u2014","\u200b","(4)","\u200b"],["Balance - September 30","","611","","611","","545","\u200b"],["Stores acquired","","1","","\u2014","","62","\u200b"],["Stores developed","\u200b","\u2014","\u200b","\u2014","\u200b","1","\u200b"],["Stores sold (3)","","(1)","","\u2014","","(1)","\u200b"],["Balance - December 31","","611","","611","","607","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(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."]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","(2)","For the quarter ended June 30, 2021, includes one store acquired by a consolidated joint venture in which we hold a 50% interest."]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","(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."]]
[[/GREPCENT_TABLE]]

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Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022 (dollars and square feet in thousands)

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[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","Non Same-Store","\u200b","Other/","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","Same-Store Property Portfolio","\u200b","Property Portfolio","\u200b","Eliminations","\u200b","Total Portfolio","\u200b"],["\u200b","","\u200b","","","\u200b","","\u200b","","%","","","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b","","\u200b","","%","\u200b"],["\u200b","2023","\u200b","2022","\u200b","Change","\u200b","Change","\u200b","2023","\u200b","2022","\u200b","2023","\u200b","2022","\u200b","2023","\u200b","2022","\u200b","Change","\u200b","Change","\u200b"],["REVENUES:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Rental income","$","882,011","\u200b","$","853,939","\u200b","$","28,072","","3.3","%","$","29,988","\u200b","$","25,350","\u200b","$","\u2014","\u200b","$","\u2014","\u200b","$","911,999","\u200b","$","879,289","\u200b","$","32,710","","3.7","%"],["Other property related income","","38,420","\u200b","","35,718","\u200b","","2,702","","7.6","%","","1,822","\u200b","","1,045","\u200b","","61,551","\u200b","","59,403","\u200b","","101,793","\u200b","","96,166","\u200b","","5,627","","5.9","%"],["Property management fee income","","\u2014","\u200b","","\u2014","\u200b","","\u2014","","0.0","%","","\u2014","\u200b","","\u2014","\u200b","","36,542","\u200b","","34,169","\u200b","","36,542","\u200b","","34,169","\u200b","","2,373","","6.9","%"],["Total revenues","","920,431","\u200b","","889,657","\u200b","","30,774","","3.5","%","","31,810","\u200b","","26,395","\u200b","","98,093","\u200b","","93,572","\u200b","","1,050,334","\u200b","","1,009,624","\u200b","","40,710","","4.0","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["OPERATING EXPENSES:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Property operating expenses","","245,447","\u200b","","241,833","\u200b","","3,614","","1.5","%","","10,050","\u200b","","9,133","\u200b","","39,283","\u200b","","42,294","\u200b","","294,780","\u200b","","293,260","\u200b","","1,520","","0.5","%"],["NET OPERATING INCOME:","","674,984","\u200b","","647,824","\u200b","","27,160","","4.2","%","","21,760","\u200b","","17,262","\u200b","","58,810","\u200b","","51,278","\u200b","","755,554","\u200b","","716,364","\u200b","","39,190","","5.5","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Store count","","592","\u200b","","592","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","19","\u200b","","19","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","611","\u200b","","611","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Total square feet","","42,338","\u200b","","42,338","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","1,794","\u200b","","1,769","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","44,132","\u200b","","44,107","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Period end occupancy","","90.3","%","","91.3","%","\u200b","\u200b","\u200b","\u200b","\u200b","","77.3","%","","66.3","%","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","89.8","%","","90.3","%","\u200b","\u200b","\u200b","\u200b","\u200b"],["Period average occupancy","","91.8","%","","93.2","%","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Realized annual rent per occupied sq. ft. (1)","$","22.70","\u200b","$","21.65","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Depreciation and amortization","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","201,238","\u200b","","310,610","\u200b","","(109,372)","","(35.2)","%"],["General and administrative","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","57,041","\u200b","","54,623","\u200b","","2,418","","4.4","%"],["Subtotal","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","258,279","\u200b","","365,233","\u200b","","(106,954)","","(29.3)","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["OTHER (EXPENSE) INCOME","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Interest:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Interest expense on loans","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","(93,065)","\u200b","","(93,284)","\u200b","","219","","0.2","%"],["Loan procurement amortization expense","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","(4,141)","\u200b","","(3,897)","\u200b","","(244)","","(6.3)","%"],["Equity in earnings of real estate ventures","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","6,085","\u200b","","48,877","\u200b","","(42,792)","","(87.6)","%"],["Other","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","6,281","\u200b","","(10,355)","\u200b","","16,636","","160.7","%"],["Total other expense","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","(84,840)","\u200b","","(58,659)","\u200b","","(26,181)","","(44.6)","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["NET INCOME","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","412,435","\u200b","","292,472","\u200b","","119,963","","41.0","%"],["Net income attributable to noncontrolling interests in the Operating Partnership","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","(2,535)","\u200b","","(1,931)","\u200b","","(604)","","(31.3)","%"],["Net loss attributable to noncontrolling interests in subsidiaries","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","857","\u200b","","722","\u200b","","135","","18.7","%"],["NET INCOME ATTRIBUTABLE TO THE COMPANY\u2019S COMMON SHAREHOLDERS","\u200b","\u200b","\u200b","$","410,757","\u200b","$","291,263","\u200b","$","119,494","","41.0","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Realized annual rent per occupied square foot is computed by dividing rental income by the weighted average occupied square feet for the period."]]
[[/GREPCENT_TABLE]]

​

Revenues

​

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).

​

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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:

​

[[GREPCENT_TABLE]]
[["","\u25cf","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;"]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","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"]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","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."]]
[[/GREPCENT_TABLE]]

​

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

Table of Contents

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):

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","Year Ended December 31,"],["\u200b","","2023","","2022"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Net income attributable to the Company\u2019s common shareholders","\u200b","$","410,757","\u200b","$","291,263"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Add (deduct):","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Real estate depreciation and amortization:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Real property","\u200b","","194,845","\u200b","","305,845"],["Company\u2019s share of unconsolidated real estate ventures","\u200b","","8,446","\u200b","","9,320"],["Gains from sales of real estate, net (1)","\u200b","","(1,477)","\u200b","","(45,705)"],["Noncontrolling interests in the Operating Partnership","\u200b","","2,535","\u200b","","1,931"],["FFO attributable to the Company's common shareholders and third-party OP unitholders","\u200b","$","615,106","\u200b","$","562,654"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["(Deduct) add:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Gain on involuntary conversion (2)","\u200b","\u200b","(4,827)","\u200b","\u200b","\u2014"],["Property damage related to hurricane, net of expected insurance proceeds","\u200b","","(844)","\u200b","","1,266"],["Transaction-related expenses (3)","\u200b","\u200b","\u2014","\u200b","","10,546"],["FFO, as adjusted, attributable to the Company\u2019s common shareholders and third-party OP unitholders","\u200b","$","609,435","\u200b","$","574,466"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Weighted average diluted shares outstanding","\u200b","\u200b","226,241","\u200b","","225,881"],["Weighted average diluted units outstanding owned by third parties","\u200b","","1,393","\u200b","","1,521"],["Weighted average diluted shares and units outstanding","\u200b","","227,634","\u200b","\u200b","227,402"]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","(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."]]
[[/GREPCENT_TABLE]]

​

40

Table of Contents

[[GREPCENT_TABLE]]
[["","(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."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","(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."]]
[[/GREPCENT_TABLE]]

​

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:

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended December 31,","\u200b","\u200b","\u200b"],["Net cash provided by (used in):","","2023","","2022","","Change"],["\u200b","\u200b","(in thousands)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating activities","\u200b","$","611,136","\u200b","$","591,466","\u200b","$","19,670","\u200b"],["Investing activities","\u200b","$","(93,818)","\u200b","$","(48,767)","\u200b","$","(45,051)","\u200b"],["Financing activities","\u200b","$","(518,026)","\u200b","$","(547,092)","\u200b","$","29,066","\u200b"]]
[[/GREPCENT_TABLE]]

​

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

Table of Contents

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

Table of Contents

Unsecured Senior Notes

​

Our unsecured senior notes are summarized as follows (collectively referred to as the “Senior Notes”):

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","\u200bDecember 31,","","Effective","\u200b","Issuance","\u200b","Maturity"],["Unsecured Senior Notes","","2023","","2022","","Interest Rate","\u200b","Date","\u200b","Date"],["\u200b","\u200b","(in thousands)","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["$300M 4.000% Guaranteed Notes due 2025 (1)","\u200b","$","300,000","\u200b","$","300,000","","3.99","%","\u200b","Various (1)","\u200b","Nov-25"],["$300M 3.125% Guaranteed Notes due 2026","\u200b","\u200b","300,000","\u200b","\u200b","300,000","\u200b","3.18","%","\u200b","Aug-16","\u200b","Sep-26"],["$550M 2.250% Guaranteed Notes due 2028","\u200b","\u200b","550,000","\u200b","\u200b","550,000","\u200b","2.33","%","\u200b","Nov-21","\u200b","Dec-28"],["$350M 4.375% Guaranteed Notes due 2029","\u200b","\u200b","350,000","\u200b","\u200b","350,000","\u200b","4.46","%","\u200b","Jan-19","\u200b","Feb-29"],["$350M 3.000% Guaranteed Notes due 2030","\u200b","\u200b","350,000","\u200b","\u200b","350,000","\u200b","3.04","%","\u200b","Oct-19","\u200b","Feb-30"],["$450M 2.000% Guaranteed Notes due 2031","\u200b","\u200b","450,000","\u200b","\u200b","450,000","\u200b","2.10","%","\u200b","Oct-20","\u200b","Feb-31"],["$500M 2.500% Guaranteed Notes due 2032","\u200b","\u200b","500,000","\u200b","\u200b","500,000","\u200b","2.59","%","\u200b","Nov-21","\u200b","Feb-32"],["Principal balance outstanding","\u200b","\u200b","2,800,000","\u200b","\u200b","2,800,000","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Less: Discount on issuance of unsecured senior notes, net","\u200b","\u200b","(10,148)","\u200b","\u200b","(11,801)","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Less: Loan procurement costs, net","\u200b","\u200b","(13,362)","\u200b","\u200b","(15,849)","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Total unsecured senior notes, net","\u200b","$","2,776,490","\u200b","$","2,772,350","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","(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\u2019s 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%."]]
[[/GREPCENT_TABLE]]

​

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

Table of Contents

​

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:

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","For the year ended December 31,"],["\u200b","\u200b","2023","\u200b","2022","\u200b","2021"],["\u200b","\u200b","(dollars and shares in thousands, except per share amounts)"],["Number of shares sold","\u200b","\u200b","\u2014","\u200b","\u200b","102","\u200b","\u200b","4,982"],["Average sales price per share","\u200b","$","\u2014","\u200b","$","50.64","\u200b","$","40.57"],["Net proceeds after deducting offering costs","\u200b","$","\u2014","\u200b","$","4,936","\u200b","$","199,977"]]
[[/GREPCENT_TABLE]]

​

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

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","December 31,","\u200b","\u200b","\u200b"],["\u200b","","2023","","2022","","Change"],["\u200b","\u200b","(in thousands)"],["Selected Assets","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Storage properties, net","\u200b","$","5,951,236","\u200b","$","6,048,003","\u200b","$","(96,767)","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Selected Liabilities","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Revolving credit facility","\u200b","\u200b","18,100","\u200b","\u200b","60,900","\u200b","\u200b","(42,800)","\u200b"],["Mortgage loans and notes payable, net","\u200b","\u200b","128,186","\u200b","\u200b","162,918","\u200b","\u200b","(34,732)","\u200b"],["Accounts payable, accrued expenses and other liabilities","\u200b","\u200b","201,419","\u200b","\u200b","214,384","\u200b","\u200b","(12,965)","\u200b"]]
[[/GREPCENT_TABLE]]

​

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.

​