sts

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


(Mark one)
☑	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, ~~2020~~2021.

	or

☐	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to .

Commission file number:
001-32324 (CubeSmart)
000-54462 (CubeSmart, L.P.)

CUBESMART

CUBESMART, L.P.

(Exact Name of Registrant as Specified in its Charter)


Maryland (CubeSmart) Delaware (CubeSmart, L.P.)		20-1024732 34-1837021
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

5 Old Lancaster Rd. Malvern, Pennsylvania		19355
(Address of Principal Executive Offices)		(Zip Code)

(610) 535-5000

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Shares, $0.01 par value per share, of CubeSmart	CUBE	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


CubeSmart	Yes ☑ No ◻
CubeSmart, L.P.	Yes ☑ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).


CubeSmart	Yes ☑ No ◻
CubeSmart, L.P.	Yes ☑ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


CubeSmart:
Large accelerated filer ☑	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐	Emerging growth company ☐

CubeSmart, L.P.:
Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☑	Smaller reporting company ☐	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


CubeSmart	◻
CubeSmart, L.P.	◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


CubeSmart	Yes ☐ No ☑
CubeSmart, L.P.	Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:


Class		Outstanding at ~~May 6, 2020~~April 28, 2021
Common shares, $0.01 par value per share, of CubeSmart		~~193,587,927~~201,516,797

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EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended March 31, ~~2020~~2021 of CubeSmart (the “Parent Company” or “CubeSmart”) and CubeSmart, L.P. (the “Operating Partnership”). The Parent Company is a Maryland real estate investment trust, or REIT, that owns its assets and conducts its operations through the Operating Partnership, a Delaware limited partnership, and subsidiaries of the Operating Partnership. The Parent Company, the Operating Partnership and their consolidated subsidiaries are collectively referred to in this report as the “Company”. In addition, terms such as “we”, “us” or “our” used in this report may refer to the Company, the Parent Company or the Operating Partnership.

The Parent Company is the sole general partner of the Operating Partnership and, as of March 31, ~~2020,~~2021, owned a ~~99.0%~~96.5% interest in the Operating Partnership. The remaining ~~1.0%~~3.5% interest consists of common units of limited partnership interest issued by the Operating Partnership to third parties in exchange for contributions of properties to the Operating Partnership. As the sole general partner of the Operating Partnership, the Parent Company has full and complete authority over the Operating Partnership’s day-to-day operations and management.

Management operates the Parent Company and the Operating Partnership as one enterprise. The management teams of the Parent Company and the Operating Partnership are identical, and their constituents are officers of both the Parent Company and of the Operating Partnership.

There are a few differences between the Parent Company and the Operating Partnership, which are reflected in the note disclosures in this report. The Company believes it is important to understand the differences between the Parent Company and the Operating Partnership in the context of how these entities operate as a consolidated enterprise. The Parent Company is a REIT, whose only material asset is its ownership of the partnership interests of the Operating Partnership. As a result, the Parent Company does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing public equity from time to time and guaranteeing the debt obligations of the Operating Partnership. The Operating Partnership holds substantially all of the assets of the Company and, directly or indirectly, holds the ownership interests in the Company’s real estate ventures. The Operating Partnership conducts the operations of the Company’s business and is structured as a partnership with no publicly traded equity. Except for net proceeds from equity issuances by the Parent Company, which are contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required by the Company’s business through the Operating Partnership’s operations, by the Operating Partnership’s direct or indirect incurrence of indebtedness or through the issuance of partnership units of the Operating Partnership or equity interests in subsidiaries of the Operating Partnership.

The substantive difference between the Parent Company’s and the Operating Partnership’s filings is the fact that the Parent Company is a REIT with public equity, while the Operating Partnership is a partnership with no publicly traded equity. In the financial statements, this difference is primarily reflected in the equity (or capital for the Operating Partnership) section of the consolidated balance sheets and in the consolidated statements of equity (or capital). Apart from the different equity treatment, the consolidated financial statements of the Parent Company and the Operating Partnership are nearly identical.

The Company believes that combining the quarterly reports on Form 10-Q of the Parent Company and the Operating Partnership into a single report will:

●

facilitate a better understanding by the investors of the Parent Company and the Operating Partnership by enabling them to view the business as a whole in the same manner as management views and operates the business;

●

remove duplicative disclosures and provide a more straightforward presentation in light of the fact that a substantial portion of the disclosure applies to both the Parent Company and the Operating Partnership; and

●

create time and cost efficiencies through the preparation of one combined report instead of two separate reports.

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In order to highlight the differences between the Parent Company and the Operating Partnership, the separate sections in this report for the Parent Company and the Operating Partnership specifically refer to the Parent Company and the Operating Partnership. In the sections that combine disclosures of the Parent Company and the Operating Partnership, this report refers to such disclosures as those of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and real estate ventures and holds assets and debt, reference to the Company is appropriate because the business is one enterprise and the Parent Company operates the business through the Operating Partnership.

As general partner with control of the Operating Partnership, the Parent Company consolidates the Operating Partnership for financial reporting purposes, and the Parent Company does not have significant assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities of the Parent Company and the Operating Partnership are the same on their respective financial statements. The separate discussions of the Parent Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company’s operations on a consolidated basis and how management operates the Company.

This report also includes separate Item 4 - Controls and Procedures sections, signature pages and Exhibits 31 and 32, certifications for each of the Parent Company and the Operating Partnership, in order to establish that the Chief Executive Officer and the Chief Financial Officer of the Parent Company and the Chief Executive Officer and the Chief Financial Officer of the Operating Partnership have made the requisite certifications and that the Parent Company and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350.

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TABLE OF CONTENTS


Part I. FINANCIAL INFORMATION
Item 1. Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3. Quantitative and Qualitative Disclosures About Market Risk	4342
Item 4. Controls and Procedures	4443

Part II. OTHER INFORMATION
Item 1. Legal Proceedings	45
~~Item 1A. Risk Factors~~	4544
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	46
~~Item 5. Other Information~~	4644
Item 6. Exhibits	4745

Filing Format

This combined Form 10-Q is being filed separately by CubeSmart and CubeSmart, L.P.

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Forward-Looking Statements

This Quarterly Report on Form 10-Q, or “this Report”, together with other statements and information publicly disseminated by the Parent Company and the Operating Partnership, contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the “Exchange Act.” Forward-looking statements include statements concerning the Company’s plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions and other information that is not historical information. In some cases, forward-looking statements can be identified by terminology such as “believes”, “expects”, “estimates”, “may”, “will”, “should”, “anticipates”, or “intends” or the negative of such terms or other comparable terminology, or by discussions of strategy. Such statements are based on assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties and other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Although we believe the expectations reflected in these forward-looking statements are based on reasonable assumptions, future events and actual results, performance, transactions or achievements, financial and otherwise, may differ materially from the results, performance, transactions or achievements expressed or implied by the forward-looking statements. As a result, you should not rely on or construe any forward-looking statements in this Report, or which management or persons acting on their behalf may make orally or in writing from time to time, as predictions of future events or as guarantees of future performance. We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this Report or as of the dates otherwise indicated in such forward-looking statements. All of our forward-looking statements, including those in this Report, are qualified in their entirety by this statement.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this Report. Any forward-looking statements should be considered in light of the risks and uncertainties referred to in Item 1A. “Risk Factors” in the Parent Company’s and the Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 and in our other filings with the Securities and Exchange Commission (“SEC”). These risks include, but are not limited to, the following:

●

adverse changes in the national and local economic, business, real estate and other market conditions;

●

the effect of competition from existing and new self-storage properties and operators on our ability to maintain or raise occupancy and rental rates;

●

the failure to execute our business plan;

●

adverse impacts from the COVID-19 pandemic, other pandemics, quarantines and stay at home orders, including the impact on our ability to operate our self-storage properties, the demand for self-storage, rental rates and fees and rent collection levels;

●

reduced availability and increased costs of external sources of capital;

●

financing risks, including the risk of over-leverage and the corresponding risk of default on our mortgage and other debt and potential inability to refinance existing or future indebtedness;

●

increases in interest rates and operating costs;

●

counterparty non-performance related to the use of derivative financial instruments;

●

risks related to our ability to maintain our Parent Company’s qualification as a REIT for federal income tax purposes;

●

the failure of acquisitions and developments to close on expected terms, or at all, or to perform as expected;

●

increases in taxes, fees and assessments from state and local jurisdictions;

●

the failure of our joint venture partners to fulfill their obligations to us or their pursuit of actions that are inconsistent with our objectives;

●

reductions in asset valuations and related impairment charges;

●

cyber security breaches, cyber attacks or a failure of our networks, systems or technology, which could adversely impact our business, customer and employee relationships;

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●

changes in real estate, zoning, use and occupancy laws or regulations;

●

risks related to or a consequence of natural disasters or acts of violence, pandemics, active shooters, terrorism, insurrection or war that affect the markets in which we operate;

~~Table of Contents~~

●

potential environmental and other liabilities;

●

governmental, administrative and executive orders and laws, which could adversely impact our business operations and customer and employee relationships;

●

uninsured or uninsurable losses and the ability to obtain insurance coverage against risks and losses;

●

the ability to attract and retain talent in the current labor market;

●

other factors affecting the real estate industry generally or the self-storage industry in particular; and

●

other risks identified in the Parent Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 and, from time to time, in other reports that we file with the SEC or in other documents that we publicly disseminate.

Given these uncertainties and the other risks identified elsewhere in this Report, we caution readers not to place undue reliance on forward-looking statements. We undertake no obligation to publicly update or revise these forward-looking statements, whether as a result of new information, future events or otherwise except as may be required by securities laws. Because of the factors referred to above, the future events discussed in or incorporated by reference in this Report may not occur and actual results, performance or achievement could differ materially from that anticipated or implied in the forward-looking statements.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CUBESMART AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	March 31,		December 31,		March 31,		December 31,
	2020		2019		2021		2020
	(unaudited)				(unaudited)

ASSETS
Storage properties	$	4,716,549	$	4,699,844	$	5,492,183	$	5,489,754
Less: Accumulated depreciation		(944,958)		(925,359)		(997,712)		(983,940)
Storage properties, net (including VIE assets of $100,143 and $92,612, respectively)		3,771,591		3,774,485
Storage properties, net (including VIE assets of $136,141 and $119,345, respectively)						4,494,471		4,505,814
Cash and cash equivalents		35,719		54,857		3,650		3,592
Restricted cash		2,760		3,584		2,342		2,637
Loan procurement costs, net of amortization		3,834		4,059		3,029		3,275
Investment in real estate ventures, at equity		95,174		91,117		93,797		92,071
Other assets, net		93,684		101,443		157,189		170,753
Total assets	$	4,002,762	$	4,029,545	$	4,754,478	$	4,778,142

LIABILITIES AND EQUITY
Unsecured senior notes, net	$	1,836,223	$	1,835,725	$	2,030,999	$	2,030,372
Revolving credit facility		—		—		52,800		117,800
Mortgage loans and notes payable, net		95,263		96,040		171,189		216,504
Lease liabilities - finance leases						65,710		65,599
Accounts payable, accrued expenses and other liabilities		136,310		137,880		166,025		159,140
Distributions payable		64,691		64,688		70,854		68,301
Deferred revenue		25,662		25,313		30,974		29,087
Security deposits		478		475		1,079		1,077
Total liabilities		2,158,627		2,160,121		2,589,630		2,687,880

Noncontrolling interests in the Operating Partnership		53,845		62,088		278,649		249,414

Commitments and contingencies

Equity
Common shares $.01 par value, 400,000,000 shares authorized, 193,587,165 and 193,557,024 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively		1,936		1,936
Common shares $.01 par value, 400,000,000 shares authorized, 200,421,556 and 197,405,989 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively						2,004		1,974
Additional paid-in capital		2,675,867		2,674,745		2,909,730		2,805,673
Accumulated other comprehensive loss		(709)		(729)		(613)		(632)
Accumulated deficit		(894,773)		(876,606)		(1,033,519)		(974,799)
Total CubeSmart shareholders’ equity		1,782,321		1,799,346		1,877,602		1,832,216
Noncontrolling interests in subsidiaries		7,969		7,990		8,597		8,632
Total equity		1,790,290		1,807,336		1,886,199		1,840,848
Total liabilities and equity	$	4,002,762	$	4,029,545	$	4,754,478	$	4,778,142

See accompanying notes to the unaudited consolidated financial statements.

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CUBESMART AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)


	Three Months Ended March 31,				Three Months Ended March 31,
	2020		2019		2021		2020

REVENUES
Rental income	$	140,985	$	131,592	$	162,476	$	140,985
Other property related income		16,902		15,675		19,304		16,902
Property management fee income		6,194		5,578		7,061		6,194
Total revenues		164,081		152,845		188,841		164,081
OPERATING EXPENSES
Property operating expenses		55,740		51,425		61,228		55,740
Depreciation and amortization		40,838		38,442		53,810		40,838
General and administrative		10,365		9,147		10,916		10,365
Total operating expenses		106,943		99,014		125,954		106,943
OTHER (EXPENSE) INCOME
Interest:
Interest expense on loans		(18,681)		(17,517)		(19,234)		(18,681)
Loan procurement amortization expense		(754)		(624)		(1,035)		(754)
Equity in (losses) earnings of real estate ventures		(5)		261
Equity in earnings (losses) of real estate ventures						20		(5)
Other		619		(165)		677		619
Total other expense		(18,821)		(18,045)		(19,572)		(18,821)
NET INCOME		38,317		35,786		43,315		38,317
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
Noncontrolling interests in the Operating Partnership		(383)		(358)		(1,549)		(383)
Noncontrolling interest in subsidiaries		(38)		70		(34)		(38)
NET INCOME ATTRIBUTABLE TO THE COMPANY’S COMMON SHAREHOLDERS	$	37,896	$	35,498	$	41,732	$	37,896

Basic earnings per share attributable to common shareholders	$	0.20	$	0.19	$	0.21	$	0.20
Diluted earnings per share attributable to common shareholders	$	0.20	$	0.19	$	0.21	$	0.20

Weighted average basic shares outstanding		193,582		187,253		199,160		193,582
Weighted average diluted shares outstanding		194,264		187,984		200,233		194,264

See accompanying notes to the unaudited consolidated financial statements.

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CUBESMART AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)


	Three Months Ended March 31,				Three Months Ended March 31,
	2020		2019		2021		2020

NET INCOME	$	38,317	$	35,786	$	43,315	$	38,317
Other comprehensive income:
Unrealized gains on interest rate swaps		—		232
Reclassification of realized losses on interest rate swaps		20		10		20		20
OTHER COMPREHENSIVE INCOME		20		242
OTHER COMPREHENSIVE INCOME:						20		20
COMPREHENSIVE INCOME		38,337		36,028		43,335		38,337
Comprehensive income attributable to noncontrolling interests in the Operating Partnership		(383)		(360)		(1,550)		(383)
Comprehensive (income) loss attributable to noncontrolling interest in subsidiaries		(38)		70
Comprehensive income attributable to noncontrolling interest in subsidiaries						(34)		(38)
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE COMPANY	$	37,916	$	35,738	$	41,751	$	37,916

See accompanying notes to the unaudited consolidated financial statements.

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CUBESMART AND SUBSIDIARIES

CONSOLIDATED ~~STATEMENTS~~STATEMENT OF EQUITY

(in thousands)

(unaudited)

Noncontrolling

Additional

Accumulated Other

Total

Noncontrolling

Interests in the

Common Shares

Paid in

Comprehensive

Accumulated

Shareholders’

Interest in

Total

Operating

Number

Amount

Capital

(Loss) Income

Deficit

Equity

Subsidiaries

Equity

Partnership

Balance at December 31, 2019

193,557

$
1,936

$
2,674,745

$
(729)

$
(876,606)

$
1,799,346

$
7,990

$
1,807,336

$
62,088

Distributions paid to noncontrolling interests in subsidiaries

(59)

(59)

Issuance of common shares

(118)

(118)

(118)

Issuance of restricted shares

30

Amortization of restricted shares

710

710

710

Share compensation expense

530

530

530

Adjustment for noncontrolling interests in the Operating Partnership

7,976

7,976

7,976

(7,976)

Net income

37,896

37,896

38

37,934

383

Other comprehensive income, net

20

20

20

Common share distributions ($0.33 per share)

(64,039)

(64,039)

(64,039)

(650)

Balance at March 31, 2020

193,587

$
1,936

$
2,675,867

$
(709)

$
(894,773)

$
1,782,321

$
7,969

$
1,790,290

$
53,845



																Noncontrolling
				Additional		Accumulated Other				Total		Noncontrolling				Interests in the
	Common Shares			Paid in		Comprehensive		Accumulated		Shareholders’		Interest in		Total		Operating
	Number	Amount		Capital		(Loss) Income		Deficit		Equity		Subsidiaries		Equity		Partnership

Balance at December 31, 2020	197,406	$	1,974	$	2,805,673	$	(632)	$	(974,799)	$	1,832,216	$	8,632	$	1,840,848	$	249,414
Distributions paid to noncontrolling interests in subsidiaries													(69)		(69)
Issuance of common shares, net	2,837		28		99,660						99,688				99,688
Issuance of restricted shares	32
Conversion from units to shares	55		1		1,912						1,913				1,913		(1,913)
Exercise of stock options	92		1		1,171						1,172				1,172
Amortization of restricted shares					705						705				705
Share compensation expense					609						609				609
Adjustment for noncontrolling interests in the Operating Partnership									(32,102)		(32,102)				(32,102)		32,102
Net income									41,732		41,732		34		41,766		1,549
Other comprehensive income, net							19				19				19		1
Common share distributions ($0.34 per share)									(68,350)		(68,350)				(68,350)		(2,504)
Balance at March 31, 2021	200,422	$	2,004	$	2,909,730	$	(613)	$	(1,033,519)	$	1,877,602	$	8,597	$	1,886,199	$	278,649


																Noncontrolling																	Noncontrolling
				Additional		Accumulated Other				Total		Noncontrolling				Interests in the					Additional		Accumulated Other				Total		Noncontrolling				Interests in the
	Common Shares			Paid in		Comprehensive		Accumulated		Shareholders’		Interest in		Total		Operating		Common Shares			Paid in		Comprehensive		Accumulated		Shareholders’		Interest in		Total		Operating
	Number	Amount		Capital		(Loss) Income		Deficit		Equity		Subsidiaries		Equity		Partnership		Number	Amount		Capital		(Loss) Income		Deficit		Equity		Subsidiaries		Equity		Partnership

Balance at December 31, 2018	187,145	$	1,871	$	2,500,751	$	(1,029)	$	(791,915)	$	1,709,678	$	6,771	$	1,716,449	$	55,819
Contributions from noncontrolling interests in subsidiaries													4,828		4,828
Balance at December 31, 2019																		193,557	$	1,936	$	2,674,745	$	(729)	$	(876,606)	$	1,799,346	$	7,990	$	1,807,336	$	62,088
Distributions paid to noncontrolling interests in subsidiaries													(66)		(66)															(59)		(59)
Acquisition of noncontrolling interest in subsidiary					(9,728)						(9,728)		(272)		(10,000)
Issuance of common shares	773		8		24,572						24,580				24,580
Issuance of common shares, net																						(118)						(118)				(118)
Issuance of restricted shares	19																	30
Conversion from units to shares	60		1		1,841						1,842				1,842		(1,842)
Exercise of stock options	140		1		1,048						1,049				1,049
Amortization of restricted shares					798						798				798							710						710				710
Share compensation expense					468						468				468							530						530				530
Adjustment for noncontrolling interest in the Operating Partnership									(6,681)		(6,681)				(6,681)		6,681									7,976		7,976				7,976		(7,976)
Net income (loss)									35,498		35,498		(70)		35,428		358
Net income																										37,896		37,896		38		37,934		383
Other comprehensive income, net							240				240				240		2							20				20				20
Common share distributions ($0.32 per share)									(60,375)		(60,375)				(60,375)		(604)
Balance at March 31, 2019	188,137	$	1,881	$	2,519,750	$	(789)	$	(823,473)	$	1,697,369	$	11,191	$	1,708,560	$	60,414
Common share distributions ($0.33 per share)																										(64,039)		(64,039)				(64,039)		(650)
Balance at March 31, 2020																		193,587	$	1,936	$	2,675,867	$	(709)	$	(894,773)	$	1,782,321	$	7,969	$	1,790,290	$	53,845

See accompanying notes to the unaudited consolidated financial statements.

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CUBESMART AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Three Months Ended March 31,				Three Months Ended March 31,
	2020		2019		2021		2020
Operating Activities
Net income	$	38,317	$	35,786	$	43,315	$	38,317
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		41,592		39,066		54,845		41,592
Equity in losses (earnings) of real estate ventures		5		(261)
Non-cash portion of interest expense related to finance leases						111		—
Equity in (earnings) losses of real estate ventures						(20)		5
Equity compensation expense		1,871		1,619		2,042		1,871
Accretion of fair market value adjustment of debt		(176)		(179)		(607)		(176)
Changes in other operating accounts:
Other assets		2,743		(3,212)		(1,718)		2,743
Accounts payable and accrued expenses		(3,743)		1,806		(1,675)		(3,743)
Other liabilities		340		833		1,889		340
Net cash provided by operating activities	$	80,949	$	75,458	$	98,182	$	80,949
Investing Activities
Acquisitions of storage properties		(9,090)		(25,097)		—		(9,090)
Additions and improvements to storage properties		(11,923)		(6,153)		(7,894)		(11,923)
Development costs		(9,709)		(49,748)		(10,932)		(9,709)
Investment in real estate ventures		(5,877)		(107)		(6,664)		(5,877)
Cash distributed from real estate ventures		1,815		2,072		4,958		1,815
Net cash used in investing activities	$	(34,784)	$	(79,033)	$	(20,532)	$	(34,784)
Financing Activities
Proceeds from:
Unsecured senior notes		—		347,746
Revolving credit facility		5,127		279,020		268,111		5,127
Principal payments on:
Revolving credit facility		(5,127)		(378,400)		(333,111)		(5,127)
Unsecured term loans		—		(200,000)
Mortgage loans and notes payable		(633)		(701)		(44,649)		(633)
Loan procurement costs		—		(2,634)
Settlement of hedge transactions		—		(807)
Acquisition of noncontrolling interest in subsidiary, net		—		(5,172)
Proceeds from issuance of common shares, net		(118)		24,580		99,688		(118)
Cash paid upon vesting of restricted shares		(631)		(353)		(728)		(631)
Exercise of stock options		—		1,049		1,172		—
Distributions paid to noncontrolling interests in subsidiaries		(59)		(66)		(69)		(59)
Distributions paid to common shareholders		(64,036)		(60,005)		(67,368)		(64,036)
Distributions paid to noncontrolling interests in Operating Partnership		(650)		(623)		(933)		(650)
Net cash (used in) provided by financing activities	$	(66,127)	$	3,634
Net cash used in financing activities					$	(77,887)	$	(66,127)
Change in cash, cash equivalents and restricted cash		(19,962)		59		(237)		(19,962)
Cash, cash equivalents and restricted cash at beginning of period		58,441		6,482		6,229		58,441
Cash, cash equivalents and restricted cash at end of period	$	38,479	$	6,541	$	5,992	$	38,479
Supplemental Cash Flow and Noncash Information
Cash paid for interest, net of interest capitalized	$	23,652	$	15,918	$	23,534	$	23,652
Supplemental disclosure of noncash activities:
Discount on issuance of unsecured senior notes	$	—	$	2,254
Accretion of put liability	$	896	$	4,070	$	2,823	$	896
Derivative valuation adjustment	$	20	$	242	$	20	$	20
Acquisition of noncontrolling interest in subsidiary	$	—	$	(4,828)
Contributions from noncontrolling interests in subsidiaries	$	—	$	4,828

See accompanying notes to the unaudited consolidated financial statements.

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CUBESMART, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)


	March 31,		December 31,		March 31,		December 31,
	2020		2019		2021		2020
	(unaudited)				(unaudited)

ASSETS
Storage properties	$	4,716,549	$	4,699,844	$	5,492,183	$	5,489,754
Less: Accumulated depreciation		(944,958)		(925,359)		(997,712)		(983,940)
Storage properties, net (including VIE assets of $100,143 and $92,612, respectively)		3,771,591		3,774,485
Storage properties, net (including VIE assets of $136,141 and $119,345, respectively)						4,494,471		4,505,814
Cash and cash equivalents		35,719		54,857		3,650		3,592
Restricted cash		2,760		3,584		2,342		2,637
Loan procurement costs, net of amortization		3,834		4,059		3,029		3,275
Investment in real estate ventures, at equity		95,174		91,117		93,797		92,071
Other assets, net		93,684		101,443		157,189		170,753
Total assets	$	4,002,762	$	4,029,545	$	4,754,478	$	4,778,142

LIABILITIES AND CAPITAL
Unsecured senior notes, net	$	1,836,223	$	1,835,725	$	2,030,999	$	2,030,372
Revolving credit facility		—		—		52,800		117,800
Mortgage loans and notes payable, net		95,263		96,040		171,189		216,504
Lease liabilities - finance leases						65,710		65,599
Accounts payable, accrued expenses and other liabilities		136,310		137,880		166,025		159,140
Distributions payable		64,691		64,688		70,854		68,301
Deferred revenue		25,662		25,313		30,974		29,087
Security deposits		478		475		1,079		1,077
Total liabilities		2,158,627		2,160,121		2,589,630		2,687,880

Limited Partnership interests of third parties		53,845		62,088		278,649		249,414

Commitments and contingencies

Capital
Operating Partner		1,783,030		1,800,075		1,878,215		1,832,848
Accumulated other comprehensive loss		(709)		(729)		(613)		(632)
Total CubeSmart, L.P. capital		1,782,321		1,799,346		1,877,602		1,832,216
Noncontrolling interests in subsidiaries		7,969		7,990		8,597		8,632
Total capital		1,790,290		1,807,336		1,886,199		1,840,848
Total liabilities and capital	$	4,002,762	$	4,029,545	$	4,754,478	$	4,778,142

See accompanying notes to the unaudited consolidated financial statements.

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CUBESMART, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per common unit data)

(unaudited)


	Three Months Ended March 31,				Three Months Ended March 31,
	2020		2019		2021		2020

REVENUES
Rental income	$	140,985	$	131,592	$	162,476	$	140,985
Other property related income		16,902		15,675		19,304		16,902
Property management fee income		6,194		5,578		7,061		6,194
Total revenues		164,081		152,845		188,841		164,081
OPERATING EXPENSES
Property operating expenses		55,740		51,425		61,228		55,740
Depreciation and amortization		40,838		38,442		53,810		40,838
General and administrative		10,365		9,147		10,916		10,365
Total operating expenses		106,943		99,014		125,954		106,943
OTHER (EXPENSE) INCOME
Interest:
Interest expense on loans		(18,681)		(17,517)		(19,234)		(18,681)
Loan procurement amortization expense		(754)		(624)		(1,035)		(754)
Equity in (losses) earnings of real estate ventures		(5)		261
Equity in earnings (losses) of real estate ventures						20		(5)
Other		619		(165)		677		619
Total other expense		(18,821)		(18,045)		(19,572)		(18,821)
NET INCOME		38,317		35,786		43,315		38,317
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
Noncontrolling interest in subsidiaries		(38)		70		(34)		(38)
NET INCOME ATTRIBUTABLE TO CUBESMART L.P.		38,279		35,856		43,281		38,279
Operating Partnership interests of third parties		(383)		(358)		(1,549)		(383)
NET INCOME ATTRIBUTABLE TO COMMON UNITHOLDERS	$	37,896	$	35,498	$	41,732	$	37,896

Basic earnings per unit attributable to common unitholders	$	0.20	$	0.19	$	0.21	$	0.20
Diluted earnings per unit attributable to common unitholders	$	0.20	$	0.19	$	0.21	$	0.20

Weighted average basic units outstanding		193,582		187,253		199,160		193,582
Weighted average diluted units outstanding		194,264		187,984		200,233		194,264

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

CUBESMART, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)


	Three Months Ended March 31,				Three Months Ended March 31,
	2020		2019		2021		2020

NET INCOME	$	38,317	$	35,786	$	43,315	$	38,317
Other comprehensive income:
Unrealized gains on interest rate swaps		—		232
Reclassification of realized losses on interest rate swaps		20		10		20		20
OTHER COMPREHENSIVE INCOME		20		242
OTHER COMPREHENSIVE INCOME:						20		20
COMPREHENSIVE INCOME		38,337		36,028		43,335		38,337
Comprehensive income attributable to Operating Partnership interests of third parties		(383)		(360)		(1,550)		(383)
Comprehensive (income) loss attributable to noncontrolling interest in subsidiaries		(38)		70
Comprehensive income attributable to noncontrolling interest in subsidiaries						(34)		(38)
COMPREHENSIVE INCOME ATTRIBUTABLE TO OPERATING PARTNER	$	37,916	$	35,738	$	41,751	$	37,916

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

CUBESMART, L.P. AND SUBSIDIARIES

CONSOLIDATED ~~STATEMENTS~~STATEMENT OF CAPITAL

(in thousands)

(unaudited)

Number of

Total

Operating

Common

Accumulated Other

CubeSmart

Noncontrolling

Partnership

OP Units

Operating

Comprehensive

L.P.

Interests in

Total

Interest

Outstanding

Partner

(Loss) Income

Capital

Subsidiaries

Capital

of Third Parties

Balance at December 31, 2019

193,557

$
1,800,075

$
(729)

$
1,799,346

$
7,990

$
1,807,336

$
62,088

Distributions to noncontrolling interests in subsidiaries

(59)

(59)

Issuance of common OP units

(118)

(118)

(118)

Issuance of restricted OP units

30

Amortization of restricted OP units

710

710

710

OP unit compensation expense

530

530

530

Adjustment for Limited Partnership interests of third parties

7,976

7,976

7,976

(7,976)

Net income

37,896

37,896

38

37,934

383

Other comprehensive income, net

20

20

20

Common OP unit distributions ($0.33 per unit)

(64,039)

(64,039)

(64,039)

(650)

Balance at March 31, 2020

193,587

$
1,783,030

$
(709)

$
1,782,321

$
7,969

$
1,790,290

$
53,845


	Number of					Total			��			Operating
	Common			Accumulated Other		CubeSmart		Noncontrolling				Partnership
	OP Units	Operating		Comprehensive		L.P.		Interests in		Total		Interest
	Outstanding	Partner		(Loss) Income		Capital		Subsidiaries		Capital		of Third Parties

Balance at December 31, 2020	197,406	$	1,832,848	$	(632)	$	1,832,216	$	8,632	$	1,840,848	$	249,414
Distributions to noncontrolling interests in subsidiaries									(69)		(69)
Issuance of common OP units, net	2,837		99,688				99,688				99,688
Issuance of restricted OP units	32
Conversion from OP units to shares	55		1,913				1,913				1,913		(1,913)
Exercise of OP unit options	92		1,172				1,172				1,172
Amortization of restricted OP units			705				705				705
OP unit compensation expense			609				609				609
Adjustment for Limited Partnership interests of third parties			(32,102)				(32,102)				(32,102)		32,102
Net income			41,732				41,732		34		41,766		1,549
Other comprehensive income, net					19		19				19		1
Common OP unit distributions ($0.34 per unit)			(68,350)				(68,350)				(68,350)		(2,504)
Balance at March 31, 2021	200,422	$	1,878,215	$	(613)	$	1,877,602	$	8,597	$	1,886,199	$	278,649


	Number of					Total						Operating		Number of					Total						Operating
	Common			Accumulated Other		CubeSmart		Noncontrolling				Partnership		Common			Accumulated Other		CubeSmart		Noncontrolling				Partnership
	OP Units	Operating		Comprehensive		L.P.		Interests in		Total		Interest		OP Units	Operating		Comprehensive		L.P.		Interests in		Total		Interest
	Outstanding	Partner		(Loss) Income		Capital		Subsidiaries		Capital		of Third Parties		Outstanding	Partner		(Loss) Income		Capital		Subsidiaries		Capital		of Third Parties

Balance at December 31, 2018	187,145	$	1,710,707	$	(1,029)	$	1,709,678	$	6,771	$	1,716,449	$	55,819
Contributions from noncontrolling interests in subsidiaries									4,828		4,828
Balance at December 31, 2019														193,557	$	1,800,075	$	(729)	$	1,799,346	$	7,990	$	1,807,336	$	62,088
Distributions to noncontrolling interests in subsidiaries									(66)		(66)											(59)		(59)
Acquisition of noncontrolling interest in subsidiary			(9,728)				(9,728)		(272)		(10,000)
Issuance of common OP units	773		24,580				24,580				24,580
Issuance of common OP units, net																(118)				(118)				(118)
Issuance of restricted OP units	19													30
Conversion from OP units to shares	60		1,842				1,842				1,842		(1,842)
Exercise of OP unit options	140		1,049				1,049				1,049
Amortization of restricted OP units			798				798				798					710				710				710
OP unit compensation expense			468				468				468					530				530				530
Adjustment for Limited Partnership interests of third parties			(6,681)				(6,681)				(6,681)		6,681			7,976				7,976				7,976		(7,976)
Net income (loss)			35,498				35,498		(70)		35,428		358
Net income																37,896				37,896		38		37,934		383
Other comprehensive income, net					240		240				240		2					20		20				20		—
Common OP unit distributions ($0.32 per unit)			(60,375)				(60,375)				(60,375)		(604)
Balance at March 31, 2019	188,137	$	1,698,158	$	(789)	$	1,697,369	$	11,191	$	1,708,560	$	60,414
Common OP unit distributions ($0.33 per unit)																(64,039)				(64,039)				(64,039)		(650)
Balance at March 31, 2020														193,587	$	1,783,030	$	(709)	$	1,782,321	$	7,969	$	1,790,290	$	53,845

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

CUBESMART, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Three Months Ended March 31,				Three Months Ended March 31,
	2020		2019		2021		2020
Operating Activities
Net income	$	38,317	$	35,786	$	43,315	$	38,317
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		41,592		39,066		54,845		41,592
Equity in losses (earnings) of real estate ventures		5		(261)
Non-cash portion of interest expense related to finance leases						111		—
Equity in (earnings) losses of real estate ventures						(20)		5
Equity compensation expense		1,871		1,619		2,042		1,871
Accretion of fair market value adjustment of debt		(176)		(179)		(607)		(176)
Changes in other operating accounts:
Other assets		2,743		(3,212)		(1,718)		2,743
Accounts payable and accrued expenses		(3,743)		1,806		(1,675)		(3,743)
Other liabilities		340		833		1,889		340
Net cash provided by operating activities	$	80,949	$	75,458	$	98,182	$	80,949
Investing Activities
Acquisitions of storage properties		(9,090)		(25,097)		—		(9,090)
Additions and improvements to storage properties		(11,923)		(6,153)		(7,894)		(11,923)
Development costs		(9,709)		(49,748)		(10,932)		(9,709)
Investment in real estate ventures		(5,877)		(107)		(6,664)		(5,877)
Cash distributed from real estate ventures		1,815		2,072		4,958		1,815
Net cash used in investing activities	$	(34,784)	$	(79,033)	$	(20,532)	$	(34,784)
Financing Activities
Proceeds from:
Unsecured senior notes		—		347,746
Revolving credit facility		5,127		279,020		268,111		5,127
Principal payments on:
Revolving credit facility		(5,127)		(378,400)		(333,111)		(5,127)
Unsecured term loans		—		(200,000)
Mortgage loans and notes payable		(633)		(701)		(44,649)		(633)
Loan procurement costs		—		(2,634)
Settlement of hedge transactions		—		(807)
Acquisition of noncontrolling interest in subsidiary, net		—		(5,172)
Proceeds from issuance of common OP units		(118)		24,580		99,688		(118)
Cash paid upon vesting of restricted OP units		(631)		(353)		(728)		(631)
Exercise of OP unit options		—		1,049		1,172		—
Distributions paid to noncontrolling interests in subsidiaries		(59)		(66)		(69)		(59)
Distributions paid to common OP unitholders		(64,686)		(60,628)		(68,301)		(64,686)
Net cash (used in) provided by financing activities	$	(66,127)	$	3,634
Net cash used in financing activities					$	(77,887)	$	(66,127)
Change in cash, cash equivalents and restricted cash		(19,962)		59		(237)		(19,962)
Cash, cash equivalents and restricted cash at beginning of period		58,441		6,482		6,229		58,441
Cash, cash equivalents and restricted cash at end of period	$	38,479	$	6,541	$	5,992	$	38,479
Supplemental Cash Flow and Noncash Information
Cash paid for interest, net of interest capitalized	$	23,652	$	15,918	$	23,534	$	23,652
Supplemental disclosure of noncash activities:
Discount on issuance of unsecured senior notes	$	—	$	2,254
Accretion of put liability	$	896	$	4,070	$	2,823	$	896
Derivative valuation adjustment	$	20	$	242	$	20	$	20
Acquisition of noncontrolling interest in subsidiary	$	—	$	(4,828)
Contributions from noncontrolling interests in subsidiaries	$	—	$	4,828

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

CUBESMART AND CUBESMART, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND NATURE OF OPERATIONS

CubeSmart (the “Parent Company”) operates as a self-managed and self-administered real estate investment trust (“REIT”) with its operations conducted solely through CubeSmart, L.P. and its subsidiaries. CubeSmart, L.P., a Delaware limited partnership (the “Operating Partnership”), operates through an umbrella partnership structure, with the Parent Company, a Maryland REIT, as its sole general partner. In the notes to the consolidated financial statements, we use the terms “the Company”, “we” or “our” to refer to the Parent Company and the Operating Partnership together, unless the context indicates otherwise. As of March 31, ~~2020,~~2021, the Company owned self-storage properties located in 24 states throughout the United States and the District of Columbia that are presented under 1 reportable segment: the Company owns, operates, develops, manages and acquires self-storage properties.

As of March 31, ~~2020,~~2021, the Parent Company owned approximately ~~99.0%~~96.5% of the partnership interests (“OP Units”) of the Operating Partnership. The remaining OP Units, consisting exclusively of limited partner interests, are held by persons who contributed their interests in properties to the Operating Partnership in exchange for OP Units. Under the partnership agreement, these persons have the right to tender their OP Units for redemption to the Operating Partnership at any time following a specified restricted period for cash equal to the fair value of an equivalent number of common shares of the Parent Company. In lieu of delivering cash, however, the Parent Company, as the Operating Partnership’s general partner, may, at its option, choose to acquire any OP Units so tendered by issuing common shares in exchange for the tendered OP Units. If the Parent Company so chooses, its common shares will be exchanged for OP Units on a 1-for-one basis. This 1-for-one exchange ratio is subject to adjustment to prevent dilution. With each such exchange or redemption, the Parent Company’s percentage ownership in the Operating Partnership will increase. In addition, whenever the Parent Company issues common or other classes of its shares, it contributes the net proceeds it receives from the issuance to the Operating Partnership and the Operating Partnership issues to the Parent Company an equal number of OP Units or other partnership interests having preferences and rights that mirror the preferences and rights of the shares issued. This structure is commonly referred to as an umbrella partnership REIT or “UPREIT”.

The Company typically experiences seasonal fluctuations in the occupancy levels of its stores, which are generally slightly higher during the summer months due to increased moving activity.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting and, in the opinion of each of the Parent Company’s and Operating Partnership’s respective management, include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of financial position, results of operations and cash flows for each respective company for the interim periods presented in accordance with generally accepted accounting principles in the United States (“GAAP”). Accordingly, readers of this Quarterly Report on Form 10-Q should refer to the Parent Company’s and the Operating Partnership’s audited financial statements prepared in accordance with GAAP, and the related notes thereto, for the year ended December 31, ~~2019,~~2020, which are included in the Parent Company’s and the Operating Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020. The results of operations for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 are not necessarily indicative of the results of operations to be expected for any future period or the full year.

The Operating Partnership meets the criteria as a variable interest entity (“VIE”). The Parent Company’s sole significant asset is its investment in the Operating Partnership. As a result, substantially all of the Parent Company’s assets and liabilities represent those assets and liabilities of the Operating Partnership. All of the Parent Company’s debt is an obligation of the Operating Partnership, and the Parent Company guarantees the unsecured debt obligations of the Operating Partnership.

Table of Contents

Recent Accounting Pronouncements

In ~~June 2016,~~August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. ~~2016-13~~2020-06 – ~~Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial~~

~~Table of Contents~~

~~Instruments.~~Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in an Entity’s Own Equity (Subtopic 815-40). The new guidance ~~changes~~eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of certain settlement provisions. In addition, the new guidance modifies how ~~entities measure credit losses for most financial assets. This standard requires an entity to estimate its lifetime expected credit loss~~particular convertible instruments and ~~record an allowance~~certain contracts that ~~when deducted from~~may be settled in cash or shares impact the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. In November 2018, the FASB issued ASU No. 2018-19 – Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarifies that receivables arising from operating leases are within the scope of the leasing standard (ASU No. 2016-02), and not within the scope of ASU No. 2016-13.diluted earnings per share computation. The standard ~~became~~is effective on January 1, ~~2020.~~2022, with early adoption permitted, but only as of the beginning of an entity’s annual fiscal year. The ~~adoption of this guidance did~~standard is not expected to have a material impact on the Company’s consolidated financial statements.

3. STORAGE PROPERTIES

The book value of the Company’s real estate assets is summarized as follows:


	March 31,		December 31,		March 31,		December 31,
	2020		2019		2021		2020

	(in thousands)				(in thousands)
Land	$	859,607	$	858,541	$	1,100,598	$	1,093,503
Buildings and improvements		3,627,204		3,619,594		4,130,146		4,122,995
Equipment		124,667		128,111		120,871		123,044
Construction in progress		105,071		93,598		98,913		108,316
Right-of-use assets - finance leases						41,655		41,896
Storage properties		4,716,549		4,699,844		5,492,183		5,489,754
Less: Accumulated depreciation		(944,958)		(925,359)		(997,712)		(983,940)
Storage properties, net	$	3,771,591	$	3,774,485	$	4,494,471	$	4,505,814

The following table summarizes the Company’s acquisition and disposition activity during the period beginning on January 1, ~~2019~~2020 through March 31, ~~2020.~~2021.


				Number of	Purchase / Sale Price					Number of	Purchase / Sale Price
Asset/Portfolio	Metropolitan Statistical Area		Transaction Date	Stores	(in thousands)			Metropolitan Statistical Area	Transaction Date	Stores	(in thousands)

2020 Acquisition:
2020 Acquisitions:

Texas Asset	San Antonio, TX		February 2020	1	$	9,025		San Antonio, TX	February 2020	1	$	9,025
Maryland Asset								Baltimore-Towson, MD	April 2020	1		17,200
New Jersey Asset								New York-Northern New Jersey-Long Island, NY-NJ-PA	April 2020	1		48,450
Florida Asset								Palm Bay-Melbourne-Titusville, FL	November 2020	1		3,900
Texas Asset								Austin-Round Rock, TX	November 2020	1		10,750
Texas Asset								Dallas-Fort Worth-Arlington, TX	November 2020	1		10,150
Nevada Asset								Las Vegas-Paradise, NV	December 2020	1		16,800
New York Asset								New York-Northern New Jersey-Long Island, NY-NJ-PA	December 2020	1		6,750
Florida Asset								Tampa-St. Petersburg-Clearwater, FL	December 2020	1		10,000
Virginia Asset								Washington-Arlington-Alexandria, DC-VA-MD-WV	December 2020	1		17,350
Storage Deluxe Assets								New York-Northern New Jersey-Long Island, NY-NJ-PA	December 2020	8		540,000
Florida Assets								Orlando-Kissimmee, FL / Deltona-Daytona Beach-Ormond Beach, FL	December 2020	3		45,500
				1	$	9,025				21	$	735,875

2019 Acquisitions:
2020 Disposition:

Maryland Asset	Baltimore-Towson, MD		March 2019	1	$	22,000
Florida Assets	Cape Coral-Fort Myers, FL		April 2019	2		19,000
Arizona Asset	Phoenix-Mesa-Scottsdale, AZ		May 2019	1		1,550
HVP III Assets	Various (see note 4)		June 2019	18		128,250	⁽¹⁾
Georgia Asset	Atlanta-Sandy Springs-Marietta, GA	��	August 2019	1		14,600
South Carolina Asset	Charleston-North Charleston, SC		August 2019	1		3,300
Texas Asset	Dallas-Fort Worth-Arlington, TX		October 2019	1		7,300
Florida Assets	Orlando-Kissimmee, FL		November 2019	3		32,100
California Asset	Los Angeles-Long Beach-Santa Ana, CA		December 2019	1		18,500
New York Asset								New York-Northern New Jersey-Long Island, NY-NJ-PA	December 2020	1	$	12,750
				29	$	246,600				1	$	12,750

2019 Disposition:

Texas Asset	College Station-Bryan, TX		October 2019	1	$	4,146
				1	$	4,146

~~(1)~~

~~Amount represents the purchase price for 90% of the ownership interest in 191 III CUBE LLC (“HVP III”), which at the time of the acquisition, owned 18 storage properties (see note 4).~~

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4. INVESTMENT ACTIVITY

~~2020 Acquisition~~The Company did

not

~~During~~ acquire or dispose of any wholly-owned stores during the three months ended March 31, 2021.

2020 ~~the~~Acquisitions

The Company acquired ~~1 store~~a portfolio of 8 stores located in ~~Texas~~the outer boroughs of New York City (the “Storage Deluxe Assets”), in 2 separate tranches during December 2020, for aan aggregate purchase price of ~~$9.0~~$540.0 million. In connection with the ~~transaction,~~acquisition of the Storage Deluxe Assets, the Company assumed 6 mortgage loans with an aggregate outstanding principal amount of $154.4 million at the time of acquisition, one of which had an outstanding principal balance of $33.2 million and was repaid immediately. The assumed mortgage debt was recorded at a fair value of $169.2 million, which includes an aggregate net premium of $14.8 million to reflect the estimated fair value of the debt at the time of assumption. The remainder of the purchase price was funded with $210.5 million of cash and $175.1 million through the issuance of 5,272,023 OP Units (see note 13). In connection with the acquisition of the Storage Deluxe Assets, which was accounted for as an asset acquisition, the Company allocated the purchase price and acquisition related costs to the tangible and intangible assets acquired based on fair value. Intangible assets consisted of in-place leases, which aggregated to ~~$0.4~~$48.6 million at the time of the acquisition and prior to amortization of such amounts. The estimated life of these in-place leases was 12 months and the amortization expense that was recognized during the three months ended March 31, ~~2020~~2021 was approximately ~~NaN~~ ~~thousand dollars.~~

As$12.1 million. Additionally, as part of ~~March 31, 2020,~~the transaction, the Company ~~had made aggregate deposits~~assumed 3 existing ground leases as lessee, 2 of ~~$2.7 million associated with 2 stores that were under contract to be acquired for~~which have been classified as finance leases and 1 of which has been classified as an ~~aggregate acquisition price of $65.7 million. The deposits are reflected in Other assets, net on the Company’s consolidated balance sheets. Both transactions closed subsequent to March 31, 2020~~operating lease (see note ~~16)~~14).

~~2019 Acquisitions~~

During the year ended December 31, ~~2019,~~2020 the Company acquired 1113 additional stores located in ~~Arizona (1), California (1),~~ Florida (5)~~, Georgia (1)~~, Maryland (1), ~~South Carolina~~Nevada (1), New Jersey (1), New York (1), Texas (3) and ~~Texas~~Virginia (1) for an aggregate purchase price of approximately ~~$118.3~~$195.9 million. In connection with these transactions, which were accounted for as asset acquisitions, the Company allocated the purchase price and acquisition related costs to the tangible and intangible assets acquired based on fair value. Intangible assets consisted of in-place leases, which aggregated to ~~$6.2~~$11.4 million at the time of the acquisitions ~~and prior to amortization of such amounts. The estimated life of these in-place leases was 12 months~~ ~~and the amortization expense that was recognized during the three months ended March 31, 2020 and 2019 was approximately~~ $1.5 million and $0.1 million, respectively. In connection with one of the acquisitions, the Company paid $14.9 million of cash and issued OP Units that were valued at approximately $3.6 million as consideration for the purchase price (see note 12).

Additionally, on June 6, 2019, the Company acquired its partner’s 90% ownership interest in HVP III, an unconsolidated real estate venture in which the Company previously owned a 10% noncontrolling interest and that was accounted for under the equity method of accounting. As of the date of acquisition, HVP III owned 18 stores located in Georgia (1), Massachusetts (7), North Carolina (1), South Carolina (7) and Tennessee (2) (the “HVP III Assets”). The purchase price for the 90% ownership interest was $128.3 million, which was comprised of cash consideration of $120.0 million and $8.3 million of the Company’s escrowed proceeds from HVP III’s sale of 50 properties to an unaffiliated buyer on June 5, 2019 (see note 5). The HVP III Assets were recorded by the Company at $137.5 million, which consisted of the $128.3 million purchase price plus the Company’s $10.6 million carryover basis of its previously held equity interest in HVP III, offset by $1.4 million of acquired cash. As a result of the transaction, which was accounted for as an asset acquisition, the HVP III Assets became wholly-owned by the Company and are now consolidated within its financial statements. NaN gain or loss was recognized as a result of the transaction. In connection with the transaction, the Company allocated the value of the HVP III Assets and acquisition related costs to the tangible and intangible assets acquired based on fair value. Intangible assets consisted of in-place leases, which aggregated to $14.3 million at the time of the acquisition and prior to amortization of such amounts. The estimated life of these in-place leases was 12 months and the amortization expense that was recognized during the three months ended March 31, 2021 and March 31, 2020 was approximately ~~$3.6 million.~~$2.8 million and thirty-two thousand dollars, respectively.

Additionally, on July 20, 2020, the Company acquired land underlying a wholly-owned store located in Bronx, New York for $9.5 million. The land was previously subject to a ground lease in which the Company served as lessee. As a result of the transaction, which was accounted for as an asset acquisition, the Company was released from its obligations under the ground lease, and the right-of-use asset and lease liability totaling $5.1 million and $5.0 million, respectively, were removed from the Company’s consolidated balance sheets.

~~2019 Disposition~~

2020 Dispositions

On ~~October 7, 2019,~~December 22, 2020, the Company sold a self-storage property located in ~~Texas~~New York for a sales price of ~~$4.1~~$12.8 million. The Company recorded a ~~$1.5~~$6.7 million gain in connection with the sale.

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Development Activity

As of March 31, ~~2020,~~2021, the Company had invested in joint ventures to develop 5 self-storage properties located in Massachusetts (1), New York (2), Pennsylvania (1) and Virginia (1). Construction for all projects is expected to be completed by the second quarter of ~~2021~~2022 (see note ~~12)~~13). As of March 31, ~~2020,~~2021, development costs incurred to date for these projects totaled ~~$85.3~~$85.7 million. Total construction costs for these projects are expected to be ~~$137.6~~$124.3 million. These costs are capitalized to construction in progress while the projects are under development and are reflected in Storage properties on the Company’s consolidated balance sheets.

The Company has completed the construction and opened for operation the following stores during the period beginning on January 1, ~~2019~~2020 through March 31, ~~2020.~~2021. The costs associated with the construction of these stores are

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capitalized to land, building and improvements, as well as equipment and are reflected in Storage properties on the Company’s consolidated balance sheets.


			CubeSmart					CubeSmart
	Number of		Ownership	Total		Number of		Ownership	Total
Store Location	Stores	Date Opened	Interest	Construction Costs		Stores	Date Opened	Interest	Construction Costs
				(in thousands)					(in thousands)

Waltham, MA ⁽¹⁾	1	Q3 2019	100%	$	18,000
Queens, NY ⁽²⁾	1	Q2 2019	100%		47,500
Bayonne, NJ ^{(2) (3)}	1	Q2 2019	100%		25,100
Arlington, VA ⁽¹⁾						1	Q1 2021	90%	$	26,400
Brooklyn, NY ⁽²⁾						1	Q2 2020	100%		45,900
	3			$	90,600	2			$	72,300

(1)

~~On August 8, 2019, the Company, through a~~This store is located adjacent to an existing consolidated joint venture store. Given their proximity to each other, the stores have been combined in ~~which the Company owned a 90% interest~~our store count, as well as for operational and that it previously consolidated, completed the construction and opened for operation a store located in Waltham, MA. On September 6, 2019, the Company acquired the noncontrolling member’s 10% interest in the venture for $2.6 million. Prior to this transaction, the noncontrolling member’s interest was reported in Noncontrolling interests in subsidiaries on the consolidated balance sheets. Since the Company retained its controlling interest in the joint venture and the store is now wholly owned, this transaction was accounted for as an equity transaction. The carrying amount of the noncontrolling interest was reduced to 0 to reflect the purchase and the $2.0 million difference between the purchase price paid by the Company and the carrying amount of the noncontrolling interest was recorded as an adjustment to equity attributable to the Company, with 0 gain or loss recorded. In conjunction with the Company’s acquisition of the noncontrolling interest, the $10.5 million related party loan extended by the Company to the venture during the construction period was repaid in full.reporting purposes (see note 13).

(2)

~~These stores were~~This store was previously owned by ~~2 separate~~a consolidated joint ~~ventures, of~~venture, in which the Company held a 51% ownership ~~interest in each.~~interest. On ~~June 25, 2019,~~September 29, 2020, the noncontrolling member in the venture that owned the ~~Bayonne, NJ~~ store put its 49% interest in the venture to the Company for ~~$11.5 million. On September 17, 2019,~~$10.0 million, of which $1.0 million was paid in cash. The Company issued 276,497 OP Units that were valued at approximately $9.0 million as consideration for the ~~noncontrolling member in~~remainder of the venture that owned the Queens, NY store put its 49% interest in the venture to the Company for $15.2 million. These amounts are included in Development costs in the consolidated statements of cash flows.purchase price (see note 13).

~~(3)~~

~~This property is subject to a ground lease.~~

During the fourth quarter of 2015 and the third quarter of 2017, the Company, through 2 separate joint ventures in which it owned a 90% interest in each and that were previously consolidated, completed the construction and opened for operation a store located in Queens, NY and a store located in New York, NY, respectively. On June 25, 2019, the Company acquired the noncontrolling member’s 10% interest in the venture that owned the New York, NY store for $18.5 million, and on June 28, 2019, the Company acquired the noncontrolling member’s 10% interest in the venture that owned the Queens, NY store for $9.0 million. Prior to these transactions, the noncontrolling members’ interest in each venture was reported in Noncontrolling interests in subsidiaries on the consolidated balance sheets. Since the Company retained its controlling interest in each joint venture and the stores are now wholly owned, these transactions were accounted for as equity transactions. In each case, the carrying amount of the noncontrolling interest was reduced to 0 to reflect the purchase, and the difference between the purchase price paid by the Company and the carrying

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amount of the noncontrolling interest, which aggregated to $22.6 million, was recorded as an adjustment to equity attributable to the Company, with 0 gain or loss recorded. The $12.4 million related party loan extended by the Company to the venture that owned the Queens, NY store was repaid in conjunction with the Company’s acquisition of the noncontrolling member’s ownership interest.

5. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES

The Company’s investments in unconsolidated real estate ventures, in which it holds a common ownership ~~interest,~~interests, are summarized as follows (in thousands):


	CubeSmart	Number of Stores as of:		Carrying Value of Investment as of:				CubeSmart	Number of Stores as of		Carrying Value of Investment as of
	Ownership	March 31,	December 31,	March 31,		December 31,		Ownership	March 31,	December 31,	March 31,		December 31,
Unconsolidated Real Estate Ventures	Interest	2020	2019	2020		2019		Interest	2021	2020	2021		2020
191 IV CUBE Southeast LLC ("HVPSE") ⁽¹⁾	10%	14	—	$	5,568	$	—
191 IV CUBE LLC ("HVP IV") ⁽²⁾	20%	21	21		22,860		23,112
CUBE HHF Northeast Venture LLC ("HHFNE") ⁽³⁾	10%	13	13		1,913		1,998
CUBE HHF Limited Partnership ("HHF") ⁽⁴⁾	50%	35	35		64,833		66,007
191 V CUBE LLC ("HVP V") ⁽¹⁾								20%	1	-	$	2,819	$	-
191 IV CUBE Southeast LLC ("HVPSE") ⁽²⁾								10%	14	14		4,829		5,015
191 IV CUBE LLC ("HVP IV") ⁽³⁾								20%	22	21		25,348		21,760
CUBE HHF Northeast Venture LLC ("HHFNE") ⁽⁴⁾								10%	13	13		1,524		1,628
CUBE HHF Limited Partnership ("HHF") ⁽⁵⁾								50%	35	35		59,277		63,668
		83	69	$	95,174	$	91,117		85	83	$	93,797	$	92,071

(1)

On March 17, 2021, the Company invested a 20% ownership interest in a newly-formed real estate venture that acquired its initial self-storage property located in Florida. HVP V paid $14.0 million for this store, of which $0.9 million was allocated to the value of the in-place lease intangible. The purchase price was contributed pro-rata by the Company and its unaffiliated joint venture partner. The Company’s total contribution to HVP V related to this acquisition was $2.8 million.

(2)

On March 19, 2020, the Company invested a 10% ownership interest in a newly-formed real estate venture that acquired 14 self-storage properties located in Florida (2), Georgia (8) and South Carolina (4). HVPSE paid $135.3 million for these stores, of which $7.7 million was allocated to the value of the in-place lease intangible. The acquisition was funded primarily through the venture’s $81.6 million secured term loan. The remainder of the purchase price was contributed pro-rata by the Company and its unaffiliated joint venture partner. The Company’s total contribution to HVPSE related to this portfolio acquisition was $5.6 million. The secured loan bears interest at LIBOR plus 1.60% and matures on March 19, 2023 with options to extend the maturity date through March 19, 2025, subject to satisfaction of certain conditions and payment of the extension fees as stipulated in the loan agreement.

~~(2)~~(3)

The stores owned by HVP IV are located in Arizona (2), Connecticut (2), Florida (4), Georgia (2), Maryland ~~(1)~~(2), Minnesota (1), Pennsylvania (1) and Texas (8). The Company’s total contribution to HVP IV in connection with these store acquisitions was ~~$26.3~~$30.1 million. As of March 31, ~~2020,~~2021, HVP IV had $82.2 million outstanding

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on its $107.0 million secured loan facility, which bears interest at LIBOR plus 1.70% per annum, and matures on May 16, ~~2021 with options to extend the maturity date through May 16, 2023, subject to satisfaction of certain conditions and payment of the extension fees as stipulated in the loan agreement.~~2021. As of March 31, ~~2020,~~2021, HVP IV also had $55.5 million outstanding under a separate secured loan that bears interest at LIBOR plus 2.75% per annum, and matures on June 9, 2022 with options to extend the maturity date through June 9, 2024, subject to satisfaction of certain conditions and payment of the extension fees as stipulated in the loan agreement. On April 19, 2021, HVP IV entered into a new secured loan and received $121.3 million in proceeds from the initial advance of the loan, which it used to repay the $82.2 million outstanding on its $107.0 million secured loan facility. The new secured loan bears interest at 1.95% over LIBOR and matures on April 19, 2025.

~~(3)~~(4)

The stores owned by HHFNE are located in Connecticut (3), Massachusetts (6), Rhode Island (2) and Vermont (2). The Company’s total contribution to HHFNE in connection with these store acquisitions was $3.8 million. As of March 31, ~~2020,~~2021, HHFNE had an outstanding $45.0 million secured loan facility, which bears interest at LIBOR plus 1.20% per annum and matures on December 16, 2024.

~~(4)~~(5)

The stores owned by HHF are located in North Carolina (1) and Texas (34). ~~As of March 31, 2020,~~On January 21, 2021, HHF ~~had an outstanding $100.0~~entered into a new $105.0 million secured loan, which bears interest at ~~3.59%~~2.58% per annum and matures on ~~April 30, 2021.~~February 5, 2028. HHF used the proceeds from this loan to repay its existing outstanding $100.0 million loan in full.

On June 5, 2019, HVP III sold 50 stores located in Florida (3), Georgia (4), Michigan (17), North Carolina (3), South Carolina (15) and Tennessee (8), to an unaffiliated third party buyer for an aggregate sales price of $293.5 million. As of the transaction date, HVP III had 5 mortgage loans with an aggregate outstanding balance of $22.9 million, as well as $179.5 million outstanding on its $185.5 million loan facility, all of which were defeased or repaid in full at the time of the sale. Net proceeds to the venture from the transaction totaled $82.9 million. The venture recorded gains which aggregated to approximately $106.7 million in connection with the sale. Subsequent to the sale, the Company acquired its partner’s 90% ownership interest in HVP III, which at the time of the acquisition, owned the remaining 18 storage properties (see note 4).

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Based upon the facts and circumstances at formation of HVP V, HVPSE, HVP IV, HHFNE and HHF (the “Ventures”), the Company determined that the Ventures are not VIEs in accordance with the accounting standard for the consolidation of VIEs. As a result, the Company used the voting interest model under the accounting standard for consolidation in order to determine whether to consolidate the Ventures. Based upon each member's substantive participating rights over the activities of each entity as stipulated in the operating agreements, the Ventures are not consolidated by the Company and are accounted for under the equity method of ~~accounting (except for HVP III, which was consolidated as of June 6, 2019).~~accounting. The Company’s investments in the Ventures are included in Investment in real estate ventures, at equity on the Company’s consolidated balance sheets and the Company’s earnings from its investments in the Ventures are presented in Equity in earnings (losses) of real estate ventures on the Company’s consolidated statements of operations.

The amounts reflected in the following table are based on the historical financial information of the Ventures.

The following is a summary of the financial position of the Ventures as of March 31, ~~2020~~2021 and December 31, ~~2019 (in thousands).~~2020.


	March 31,		December 31,		March 31,		December 31,
	2020		2019 ⁽¹⁾		2021		2020 ⁽¹⁾

Assets	(in thousands)				(in thousands)
Storage properties, net	$	677,226	$	552,791	$	686,849	$	662,833
Other assets		21,120		11,997		22,924		18,112
Total assets	$	698,346	$	564,788	$	709,773	$	680,945

Liabilities and equity
Debt					$	367,547	$	359,985
Other liabilities	$	11,836	$	10,064		12,494		11,588
Debt		360,950		280,392
Equity
CubeSmart		95,174		91,117		93,797		92,071
Joint venture partners		230,386		183,215		235,935		217,301
Total liabilities and equity	$	698,346	$	564,788	$	709,773	$	680,945

(1)

Excludes ~~HVPSE~~HVP V as it acquired its initial ~~assets~~asset on March ~~19, 2020.~~17, 2021.

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The following is a summary of results of operations of the Ventures for the three months ended March 31, ~~2020~~2021 and ~~2019 (in thousands):~~2020.


	Three Months Ended March 31,				Three Months Ended March 31,
	2020		2019 ⁽¹⁾		2021 ⁽¹⁾		2020 ⁽²⁾

					(in thousands)
Total revenues	$	14,605	$	23,203	$	18,823	$	14,605
Operating expenses		6,942		10,163		(8,605)		(6,942)
Other expenses		113		142
Other income (expenses)						3		(113)
Interest expense, net		2,720		4,216		(3,535)		(2,720)
Depreciation and amortization		6,423		9,506		(8,713)		(6,423)
Net loss	$	(1,593)	$	(824)	$	(2,027)	$	(1,593)
Company’s share of net (loss) income	$	(5)	$	261
Company’s share of net income (loss)					$	20	$	(5)

(1)

Represents a partial quarter of HVP V as it acquired its initial asset on March 17, 2021.

(2)

Excludes HVP V as it acquired its initial asset on March 17, 2021 and represents a partial quarter of HVPSE as it acquired its initial assets on March 19, ~~2020 and includes HVP III as its assets were not sold until June 5, 2019.~~2020.

6. OTHER ASSETS

Other assets are comprised of the following as of March 31, 2021 and December 31, 2020:


	March 31,		December 31,
	2021		2020

	(in thousands)
Intangible assets, net of accumulated amortization of $16,688 and $2,123	$	42,867	$	57,820
Accounts receivable, net		5,313		5,829
Prepaid property taxes		5,403		6,334
Prepaid property and casualty insurance		1,540		2,626
Amounts due from affiliates (see note 15)		15,048		13,130
Assets held in trust related to deferred compensation arrangements		19,345		17,207
Right-of-use assets - operating leases (see note 14)		54,989		55,302
Equity investment recorded at cost ⁽¹⁾		5,000		5,000
Other		7,684		7,505
Total other assets, net	$	157,189	$	170,753

(1)

On September 5, 2018, the Company invested $5.0 million in exchange for 100% of the Class A preferred units of Capital Storage Partners, LLC (“Capital Storage”), a newly formed venture that acquired 22 self-storage properties located in Florida (4), Oklahoma (5) and Texas (13). The Class A preferred units earn an 11% cumulative dividend prior to any other distributions. The Company’s investment in Capital Storage and the related dividends are included in Other assets, net on the Company’s consolidated balance sheets and in Other income on the Company’s consolidated statements of operations, respectively.

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~~Capital Storage Partners, LLC (“Capital Storage”)~~

On September 5, 2018, the Company invested $5.0 million in exchange for 100% of the Class A Preferred Units of Capital Storage Partners, LLC, a newly formed venture that acquired 22 self-storage properties located in Florida (4), Oklahoma (5) and Texas (13). The Class A Preferred Units earn an 11% cumulative dividend prior to any other distributions. The Company’s investment in Capital Storage and the related dividends are included in Other assets, net on the Company’s consolidated balance sheets and in Other income on the Company’s consolidated statements of operations, respectively.

6.7. UNSECURED SENIOR NOTES

The Company’s unsecured senior notes are summarized as follows (collectively referred to as the “Senior Notes”):


	March 31,		December 31,		Effective		Issuance	Maturity	March 31,		December 31,		Effective		Issuance	Maturity
Unsecured Senior Notes	2020		2019		Interest Rate		Date	Date	2021		2020		Interest Rate		Date	Date

	(in thousands)								(in thousands)
$250M 4.800% Guaranteed Notes due 2022	$	250,000	$	250,000	4.82	%	Jun-12	Jul-22
$300M 4.375% Guaranteed Notes due 2023 ⁽¹⁾		300,000		300,000	4.33	%	Various ⁽¹⁾	Dec-23	$	300,000	$	300,000	4.33	%	Various ⁽¹⁾	Dec-23
$300M 4.000% Guaranteed Notes due 2025 ⁽²⁾		300,000		300,000	3.99	%	Various ⁽²⁾	Nov-25		300,000		300,000	3.99	%	Various ⁽²⁾	Nov-25
$300M 3.125% Guaranteed Notes due 2026		300,000		300,000	3.18	%	Aug-16	Sep-26		300,000		300,000	3.18	%	Aug-16	Sep-26
$350M 4.375% Guaranteed Notes due 2029		350,000		350,000	4.46	%	Jan-19	Feb-29		350,000		350,000	4.46	%	Jan-19	Feb-29
$350M 3.000% Guaranteed Notes due 2030		350,000		350,000	3.04	%	Oct-19	Feb-30		350,000		350,000	3.04	%	Oct-19	Feb-30
$450M 2.000% Guaranteed Notes due 2031										450,000		450,000	2.10	%	Oct-20	Feb-31
Principal balance outstanding		1,850,000		1,850,000						2,050,000		2,050,000
Less: Discount on issuance of unsecured senior notes, net		(3,759)		(3,860)						(7,278)		(7,470)
Less: Loan procurement costs, net		(10,018)		(10,415)						(11,723)		(12,158)
Total unsecured senior notes, net	$	1,836,223	$	1,835,725					$	2,030,999	$	2,030,372

(1)

On April 4, 2017, the Operating Partnership issued $50.0 million of its 4.375% senior notes due 2023, which are part of the same series as the $250.0 million principal amount of the Operating Partnership’s 4.375% senior notes due December 15, 2023 issued on December 17, 2013. The $50.0 million and $250.0 million tranches were priced at 105.040% and 98.995%, respectively, of the principal amount to yield 3.495% and 4.501%, respectively, to maturity. The combined weighted average effective interest rate of the 2023 notes is 4.330%.

(2)

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’s 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%.

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~~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 March 31, ~~2020,~~2021, the Operating Partnership was in compliance with all of the financial covenants under the Senior Notes.

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7.8. REVOLVING CREDIT FACILITY ~~AND UNSECURED TERM LOANS~~

On December 9, 2011, the Company entered into a credit agreement (the “Credit Facility”), which was subsequently amended on April 5, 2012, June 18, 2013 and April 22, 2015 to provide for, among other things, a $200.0 million unsecured term loan with a maturity date of January 31, 2019 and a $500.0 million unsecured revolving facility with a maturity date of April 22, 2020.. On June 19, 2019, the Company amended and restated, in its entirety, the Credit Facility (the “Amended and Restated Credit Facility”) which, subsequent to the amendment and restatement, is comprised of a $750.0 million unsecured revolving facility (the “Revolver”) maturing on June 19, 2024. Under the Amended and Restated Credit Facility, pricing on the Revolver is dependent upon the Company’s unsecured debt credit ratings. At the Company’s current Baa2/BBB level, amounts drawn under the Revolver are priced at 1.10% over LIBOR, inclusive of a facility fee of 0.15%. The Company incurred costs of $3.9 million in 2019 in connection with amending and restating the Credit Facility and capitalized such costs as a component of Loan procurement costs, net of amortization on the consolidated balance sheets.

As of March 31, ~~2020,~~2021, borrowings under the Revolver had an effective ~~weighted average~~ interest rate of ~~2.09%~~1.21%. Additionally, as of March 31, ~~2020, $749.3~~2021, $696.6 million was available for borrowing under the Revolver. The available balance under the Revolver is reduced by an outstanding letter of credit of ~~$0.7~~$0.6 million.

~~On January 31, 2019, the Company used a portion~~23

Table of the net proceeds from the issuance of $350.0 million of 4.375% Senior Notes due 2029 (the “2029 Notes”) to repay all of the outstanding indebtedness under the $200.0 million unsecured term loan portion of the Credit Facility. Contents

On June 20, 2011, the Company entered into an unsecured term loan agreement (the “Term Loan Facility”), which was subsequently amended on June 18, 2013 and August 5, 2014, consisting of, among other things, a $100.0 million unsecured term loan that was scheduled to mature in January 2020. On June 19, 2019, the Company used an initial advance at closing of the Amended and Restated Credit Facility to repay all of the outstanding indebtedness under the unsecured term loan portion of the Term Loan Facility. Unamortized loan procurement costs of $0.1 million were written off in conjunction with the repayment.

Under the Amended and Restated Credit Facility, the Company’s 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 March 31, ~~2020,~~2021, the Company was in compliance with all of its financial covenants.

8.9. MORTGAGE LOANS AND NOTES PAYABLE

The Company’s mortgage loans and notes payable are summarized as follows:


	Carrying Value as of:							Carrying Value as of
	March 31,		December 31,		Effective		Maturity	March 31,		December 31,		Effective		Maturity
Mortgage Loans and Notes Payable	2020		2019		Interest Rate		Date	2021		2020		Interest Rate		Date

	(in thousands)							(in thousands)
YSI 26	$	7,748	$	7,805	4.56	%	Nov-20
YSI 57		2,720		2,740	4.61	%	Nov-20
YSI 55		21,419		21,547	4.85	%	Jun-21
YSI 24		23,822		24,042	4.64	%	Jun-21
YSI 65		2,300		2,313	3.85	%	Jun-23
YSI 66		30,437		30,588	3.51	%	Jun-23
YSI 68		5,415		5,459	3.78	%	May-24
Bronx IX, NY ⁽¹⁾								$	—	$	21,030	4.85	%	Jun-21
Bronx X, NY ⁽¹⁾									—		23,148	4.64	%	Jun-21
Nashville V, TN									2,247		2,261	3.85	%	Jun-23
New York, NY									29,819		29,981	3.51	%	Jun-23
Annapolis I, MD									5,238		5,283	3.78	%	May-24
Brooklyn XV, NY									15,658		15,713	2.15	%	May-24
Long Island City IV, NY									12,801		12,852	2.15	%	May-24
Long Island City II, NY									19,034		19,094	2.25	%	Jul-26
Long Island City III, NY									19,022		19,106	2.25	%	Aug-26
Flushing II, NY									54,300		54,300	2.15	%	Jul-29
Principal balance outstanding		93,861		94,494					158,119		202,768
Plus: Unamortized fair value adjustment		1,657		1,833					15,080		15,879
Less: Loan procurement costs, net		(255)		(287)					(2,010)		(2,143)
Total mortgage loans and notes payable, net	$	95,263	$	96,040				$	171,189	$	216,504

(1)

These mortgage loans were repaid in full on March 1, 2021.

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As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company’s mortgage loans payable were secured by certain of its self-storage properties with net book values of approximately ~~$204.9~~$457.0 million and ~~$206.3~~$539.2 million, respectively. The following table represents the future principal payment requirements on the outstanding mortgage loans and notes payable as of March 31, ~~2020~~2021 (in thousands):


2020	$	12,158
2021		45,057	$	1,733
2022		923		2,426
2023		31,019		32,591
2024		4,704		32,329
2025 and thereafter		—
2025				979
2026 and thereafter				88,061
Total mortgage payments		93,861		158,119
Plus: Unamortized fair value adjustment		1,657		15,080
Less: Loan procurement costs, net		(255)		(2,010)
Total mortgage loans and notes payable, net	$	95,263	$	171,189

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9.10. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table summarizes the changes in accumulated other comprehensive loss by component for the three months ended March 31, ~~2020~~2021 (in thousands):


			~~Unrealized Gains (Losses)~~		March 31,
			~~on Interest Rate Swaps~~		2021
		(in thousands)
Beginning balance	$	(656)
~~Balance at December 31, 2019~~Reclassification of realized losses on interest rate swaps ⁽¹⁾		$	~~(729)~~	20
~~Amounts reclassified from accumulated other comprehensive loss~~Ending balance			20	⁽¹⁾(636)
~~Balance at March 31, 2020~~Less: portion included in noncontrolling interests in the Operating Partnership		23
Total accumulated other comprehensive loss included in equity	~~(709)~~$	(613)

(1)	See note 1011 for additional information about the effects of the amounts reclassified.

~~10.~~11. RISK MANAGEMENT AND USE OF FINANCIAL INSTRUMENTS

The Company’s use of derivative instruments is limited to the utilization of interest rate swap agreements or other instruments to manage interest rate risk exposure and not for speculative purposes. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure, as well as to hedge specific transactions. The counterparties to these arrangements are major financial institutions with which the Company and its subsidiaries may also have other financial relationships. The Company is potentially exposed to credit loss in the event of non-performance by these counterparties. However, because of the high credit ratings of the counterparties, the Company does not anticipate any of the counterparties will fail to meet these obligations as they come due. The Company does not hedge credit or property value market risks.

The Company formally assesses, both at inception of a hedge and on an on-going basis, whether each derivative is highly-effective in offsetting changes in cash flows of the hedged item. If management determines that the derivative is highly-effective as a hedge, then the Company accounts for the derivative using hedge accounting, pursuant to which gains or losses inherent in the derivative do not impact the Company’s results of operations. If management determines that the derivative is not highly-effective as a hedge or if a derivative ceases to be a highly-effective hedge, the Company discontinues hedge accounting prospectively and reflects in its statement of operations realized and unrealized gains and losses with respect to the derivative. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, all derivative instruments entered into by the Company had been settled.

On December 24, 2018, the Company entered into interest rate swap agreements with notional amounts that aggregated to $150.0 million (the “Interest Rate Swaps”) to protect the Company against adverse fluctuations in interest rates by reducing exposure to variability in cash flows relating to interest payments on a forecasted issuance of long-term

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debt. The Interest Rate Swaps qualified and were designated as cash flow hedges. Accordingly, the Interest Rate Swaps were recorded on the consolidated balance sheet at fair value and the related gains or losses were deferred in shareholders’ equity as accumulated other comprehensive income or loss. These deferred gains and losses were amortized into interest expense during the period or periods in which the related interest payments affected earnings. On January 24, 2019, in conjunction with the issuance of the 2029 Notes, the Company settled the Interest Rate Swaps for $0.8 million. The $0.8 million termination premium will be reclassified from accumulated other comprehensive loss as an increase to interest expense over the life of the 2029 Notes, which mature on February 15, 2029. The change in unrealized losses on interest rate swaps reflects a reclassification of 20 thousand dollars of unrealized losses from accumulated other comprehensive loss as an increase to interest expense during the three months ended March 31, ~~2020.~~2021. The Company estimates that $0.1 million will be reclassified as an increase to interest expense in the next 12 months.

~~11.~~12. FAIR VALUE MEASUREMENTS

The Company applies the methods of determining fair value as described in authoritative guidance, to value its financial assets and liabilities. As defined in the guidance, fair value is based on the price that would be received from

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the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, the guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs, to the extent possible, as well as considering counterparty credit risk in its assessment of fair value.

There were 0 financial assets or liabilities carried at fair value as of March 31, ~~2020~~2021 or December 31, ~~2019.~~2020.

The fair values of financial instruments, including cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate their respective carrying values at March 31, ~~2020~~2021 and December 31, ~~2019.~~ 2020.

The ~~aggregate~~following table summarizes the carrying value ~~of the Company’s debt was $1,931.5 million~~ and ~~$1,931.8 million at March 31, 2020 and December 31, 2019, respectively. The~~ estimated fair value of the Company’s debt ~~was $2,022.7 million and $2,037.6 million at~~as of March 31, ~~2020~~2021 and December 31, ~~2019, respectively.~~ 2020:


	March 31,		December 31,
	2021		2020

		(in thousands)
Carrying value	$	2,254,988	$	2,364,676
Fair value		2,348,913		2,571,300

The fair value of debt estimates were based on a discounted cash flow analysis assuming market interest rates for comparable obligations at March 31, ~~2020~~2021 and December 31, ~~2019.~~2020. The Company estimates the fair value of its ~~fixed rate~~fixed-rate debt and the credit spreads over variable market rates on its ~~variable rate~~variable-rate debt by discounting the future cash flows of each instrument at estimated market rates or credit spreads consistent with the maturity of the debt obligation with similar credit policies, which is classified within level 2 of the fair value hierarchy. Rates and credit spreads take into consideration general market conditions and maturity.

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~~12.~~13. NONCONTROLLING INTERESTS

Interests in Consolidated Joint Ventures

Noncontrolling interests in subsidiaries represent the ownership interests of third parties in the Company’s consolidated real estate ventures. The Company has determined that these ventures are VIEs, and that the Company is the primary beneficiary. Accordingly, the Company consolidates the assets, liabilities and results of operations of the real estate ventures in the table below (dollars in thousands):

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			Date Opened /	CubeSmart							Date Opened /	CubeSmart
	Number		Estimated	Ownership	March 31, 2020				Number		Estimated	Ownership	March 31, 2021
Consolidated Joint Ventures	of Stores	Location	Opening	Interest	Total Assets		Total Liabilities		of Stores	Location	Opening	Interest	Total Assets		Total Liabilities

					(in thousands)								(in thousands)
CS Valley Forge Village Storage, LLC ("VFV") ⁽¹⁾	1	King of Prussia, PA	Q2 2021 (est.)	70%	$	7,022	$	1,592
Shirlington Rd II, LLC ("SH2") ⁽²⁾	1	Arlington, VA	Q1 2021 (est.)	90%		10,429		998
CS 2087 Hempstead Tpk, LLC ("Hempstead") ⁽³⁾	1	East Meadow, NY	Q1 2021 (est.)	51%		13,543		3,941
CS SDP Newtonville, LLC ("Newton") ⁽¹⁾	1	Newton, MA	Q4 2020 (est.)	90%		12,461		5,938
CS 1158 McDonald Ave, LLC ("McDonald Ave") ⁽³⁾	1	Brooklyn, NY	Q2 2020 (est.)	51%		42,312		10,687
Shirlington Rd, LLC ("SH1") ⁽²⁾	1	Arlington, VA	Q2 2015	90%		14,759		241
CS Vienna, LLC ("Vienna") ⁽¹⁾									1	Vienna, VA	Q2 2022 (est.)	72%	$	17,865	$	6,553
CS 750 W Merrick Rd, LLC ("Merrick") ⁽²⁾									1	Valley Stream, NY	Q1 2022 (est.)	51%		15,626		8,181
CS Valley Forge Village Storage, LLC ("VFV") ⁽³⁾									1	King of Prussia, PA	Q2 2021 (est.)	70%		20,654		12,333
CS 2087 Hempstead Tpk, LLC ("Hempstead") ⁽²⁾									1	East Meadow, NY	Q2 2021 (est.)	51%		24,336		7,104
CS SDP Newtonville, LLC ("Newton") ⁽³⁾									1	Newton, MA	Q2 2021 (est.)	90%		18,345		11,828
SH3, LLC ("SH3") ⁽⁴⁾									1	Arlington, VA	Q2 2015/Q1 2021	90%		39,659		6,667
	6				$	100,526	$	23,397	6				$	136,485	$	52,666

(1)

On December 23, 2020, the Company and the noncontrolling member contributed a previously wholly-owned operating property (the “Vienna Operating Property”) and a parcel of land (the “Vienna Land”), respectively, to Vienna. The Vienna Operating Property and the Vienna Land are located in close proximity to each other in Vienna, VA. The members intend to construct a new store on the Vienna Land, which, upon completion, will be combined with the Vienna Operating Property and operated by the venture as a single store. The Company has a related party ~~loan~~ commitment to ~~VFV and Newton~~Vienna to fund all or a portion of the construction costs. As of March 31, ~~2020,~~2021, the Company has funded ~~$5.0~~$5.4 million of ~~the~~a total ~~$12.1~~$17.0 million loan commitment to ~~Newton,~~Vienna, which is included in the total ~~liability~~liabilities amount within the table above. This loan and the related interest were eliminated for consolidation purposes. ~~As of March 31, 2020, the Company had not funded any of its $12.4 million loan commitment to VFV.~~

(2)

On March 7, 2019, the Company acquired the noncontrolling member’s ownership interest in SH1, inclusive of its promoted interest in the venture, for $10.0 million. Prior to this transaction, the noncontrolling member’s interest was reported in Noncontrolling interests in subsidiaries on the consolidated balance sheets. Since the Company retained its controlling interest in the joint venture, this transaction was accounted for as an equity transaction. The carrying amount of the noncontrolling interest was reduced to 0 to reflect the purchase, and the $9.7 million difference between the purchase price paid by the Company and the carrying amount of the noncontrolling interest was recorded as an adjustment to equity attributable to the Company. In conjunction with the Company’s acquisition of the noncontrolling interest in SH1, the $12.2 million related party loan extended by the Company to the venture during the construction period was repaid in full. Subsequently, the noncontrolling member re-acquired a 10% interest in SH1 and a 10% interest in SH2 for a combined $4.8 million, which is included in Noncontrolling interests in subsidiaries on the consolidated balance sheets.

~~(3)~~

The noncontrolling members of ~~Hempstead~~Merrick and ~~McDonald Ave~~Hempstead have the option to put their ownership interest in the ventures to the Company for $17.1 million and $6.6 million ~~and $10.0 million,~~(the “Put Option”), respectively, within the ~~one-year~~two-year period after construction of each store is substantially ~~complete. Additionally,~~complete (the “Put Option Period”). In the event the Put Option is not exercised, the Company has a one-year option to call the ownership interest of the noncontrolling members of Merrick and Hempstead ~~and McDonald Ave~~ for ~~$6.6~~$17.1 million and ~~$10.0~~$6.6 million, respectively, beginning ontwelve months after the ~~second anniversary~~end of the ~~respective store’s construction being substantially complete.~~Put Option Period. The Company, at its sole discretion, may pay cash and/or issue OP Units, in exchange for the noncontrolling member’s interest in ~~Hempstead~~Merrick and ~~McDonald.~~Hempstead. The Company is accreting the respective liabilities during the development periods and, as of March 31, ~~2020,~~2021, has accrued ~~$3.6~~$7.3 million and ~~$9.9~~$6.2 million, related to ~~Hempstead~~Merrick and ~~McDonald Ave,~~Hempstead, respectively, which are included in Accounts payable, accrued expenses and other liabilities on the Company’s consolidated balance sheets.

On May 30, 2019, the Company sold its 90% ownership interest in CS SJM E 92nd Street, LLC, a previously consolidated development joint venture, for $3.7 million. In conjunction with the sale, $0.7 million of the $1.7 million related party loan extended by the Company to the venture was repaid. The remaining $1.0 million was recorded as a note receivable and was repaid during the third quarter of 2019. Additionally, as a result of the transaction, the Company was released from its obligations under the venture’s ground lease, and right-of-use assets and lease liabilities totaling $13.4 million and $14.6 million, respectively, were removed from the Company’s consolidated balance sheets.

(3)

The Company has related party loan commitments to VFV and Newton to fund a portion of the construction costs. As of March 31, 2021, the Company has funded $9.6 million of the total $12.4 million loan commitment to VFV and $11.1 million of the total $12.1 million loan commitment to Newton, which are included in the total liability amounts within the table above. These loans and the related interest were eliminated for consolidation purposes.

(4)

SH3 owns 2 stores located in close proximity to each other in Arlington, VA, the first of which was developed and opened for operation in April 2015 (“Shirlington I”) and the second of which was developed and opened for operation in March 2021 (“Shirlington II”). Given their close proximity to each other, the two stores were combined in our store count, as well as for operational and reporting purposes, upon the opening of Shirlington II in March 2021.

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Operating Partnership Ownership

The Company follows guidance regarding the classification and measurement of redeemable securities. Under this guidance, securities that are redeemable for cash or other assets, at the option of the holder and not solely within the control of the issuer, must be classified outside of permanent equity/capital. This classification results in certain outside ownership interests being included as redeemable noncontrolling interests outside of permanent equity/capital in the

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consolidated balance sheets. The Company makes this determination based on terms in applicable agreements, specifically in relation to redemption provisions.

Additionally, with respect to redeemable ownership interests in the Operating Partnership held by third parties for which CubeSmart has a choice to settle the redemption by delivery of its own shares, the Operating Partnership considered the guidance regarding accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own shares, to evaluate whether CubeSmart controls the actions or events necessary to presume share settlement. The guidance also requires that noncontrolling interests classified outside of permanent capital be adjusted each period to the greater of the carrying value based on the accumulation of historical cost or the redemption value.

Approximately ~~1.0%~~3.5% and 3.6% of the outstanding OP Units, as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 were not owned by CubeSmart, the sole general partner. The interests in the Operating Partnership represented by these OP Units were a component of the consideration that the Operating Partnership paid to acquire certain self-storage properties. The holders of the OP Units are limited partners in the Operating Partnership and have the right to require CubeSmart to redeem all or part of their OP Units for, at the general partner’s option, an equivalent number of common shares of CubeSmart or cash based upon the fair value of an equivalent number of common shares of CubeSmart. However, the partnership agreement contains certain provisions that could result in a settlement outside the control of CubeSmart and the Operating Partnership, as CubeSmart does not have the ability to settle in unregistered shares. Accordingly, consistent with the guidance, the Operating Partnership will record the OP Units owned by third parties outside of permanent capital in the consolidated balance sheets. Net income or loss related to the OP Units owned by third parties is excluded from net income or loss attributable to Operating Partner in the consolidated statements of operations.

OnIn 2 separate tranches during December ~~16, 2019,~~2020, the Company acquired the Storage Deluxe Assets for an aggregate purchase price of $540.0 million. In connection with the acquisition of the Storage Deluxe Assets, the Company issued 5,272,023 OP Units valued at approximately $175.1 million to fund a portion of the purchase price.

On September 29, 2020, the Company acquired the noncontrolling interest in a previously consolidated joint venture that owned a store in ~~California~~New York for ~~$18.5~~$10.0 million. In conjunction with the closing, the Company paid ~~$14.9~~$1.0 million in cash and issued ~~106,738~~276,497 OP Units, valued at approximately ~~$3.6~~$9.0 million, to pay the remaining consideration.

~~On January~~As of March 31, ~~2018, the Company acquired a store in Texas for $12.2 million~~2021 and assumed an existing mortgage loan with an outstanding balance of approximately $7.2 million, which was immediately repaid by the Company. In conjunction with the closing, the Company paid $0.2 million in cashDecember 31, 2020, 7,365,828 and ~~issued 168,011~~7,420,828 OP ~~Units, valued at approximately $4.8 million, to pay the remaining consideration.~~

~~1,972,308 OP~~ units, respectively, were held by third ~~parties as of March 31, 2020 and December 31, 2019.~~parties. The per unit cash redemption amount of the outstanding OP units was calculated based upon the ~~average of the~~ closing ~~prices~~price of the common shares of CubeSmart on the New York Stock Exchange ~~for~~on the final 10 trading ~~days~~day of the quarter. Based on the Company’s evaluation of the redemption value of the redeemable noncontrolling interest, the Company has reflected these interests at the greater of the carrying value based on the accumulation of historical cost or the redemption value at March 31, ~~2020~~2021 and December 31, ~~2019.~~2020. As of March 31, ~~2020, the Operating Partnership recorded a decrease in the value of OP Units owned by third parties~~2021 and ~~a corresponding increase to capital of $8.0 million. As of~~ December 31, ~~2019,~~2020, the Operating Partnership recorded an increase in the value of OP Units owned by third parties and a corresponding decrease to capital of ~~$5.9 million.~~$32.1 million and $4.2 million, respectively.

~~13.~~14. LEASES

CubeSmart as Lessor

The Company derives revenue primarily from rents received from customers who rent cubes at its self-storage properties under month-to-month leases for personal or business use. The self-storage lease agreements utilized by the Company vary slightly to comply with state-specific laws and regulations, but, subject to such laws and regulations, generally provide for automatic monthly renewals, flexibility to increase rental rates over time as market conditions permit and the collection of contingent fees such as administrative and late fees. None of the self-storage lease

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agreements contain options that allow the customer to purchase the leased space at any time during, or at the expiration of, the lease term. All self-storage leases in which the Company serves as lessor have been classified as operating leases. Accordingly, storage cubes are carried at historical cost less accumulated depreciation and impairment, if any, and are included in Storage properties on the Company’s consolidated balance sheets. Operating lease income for amounts received under the Company’s self-storage lease

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agreements is recognized on a straight-line basis which, due to the month-to-month nature of the leases, results in the recognition of income during the initial term and each subsequent monthly renewal using the then-in-place rent amount. Operating lease income is included in Rental income within the Company’s consolidated statements of operations. Variable lease income related to the Company’s self-storage lease agreements consists of administrative and late fees charged to customers. For ~~each of~~ the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, administrative and late fees totaled $4.8 million and $5.4 million, respectively. Administrative and late fees are included in Other property related income within the Company’s consolidated statements of operations.

CubeSmart as Lessee

The Company serves as lessee in lease agreements for land, office space, automobiles and certain equipment, which have remaining lease terms ~~ranging from one year~~of up to 44 years. Certain of the Company’s leases ~~contain provisions that~~ (1) provide for one or more options to renew, with renewal options that can extend the lease ~~term from one year~~up to 69 years, (2) allow for early termination at certain points during the lease term and/or (3) give the Company the option to purchase the leased property. In all cases, the exercise of the lease renewal, termination and purchase options, if provided for in the lease, are at the Company’s sole discretion. Certain of the Company’s lease agreements, particularly its land leases, require rental payments that are periodically adjusted for inflation using a defined index. None of the Company’s lease agreements contain any material residual value guarantees or material restrictive covenants. ~~As a result of~~Lease expense for payments related to the Company’s ~~election of~~finance leases is recognized as interest expense using the ~~package of practical expedients permitted within ASC 842, which among other things, allows for~~interest method over the ~~carryforward of historical~~related lease ~~classification, all of the Company’s lease agreements have been classified as operating leases.~~term. Lease expense for payments related to the Company’s operating leases is recognized on a straight-line basis over the related lease term, which includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments as specified in the lease. Right-of-use assets and lease liabilities related to the Company’s operating leases are recognized at the lease commencement date based on the present value of the remaining lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available surrounding the Company’s unsecured borrowing rates and implied secured spread at the lease commencement date in determining the present value of lease payments. The right-of-use asset also includes any lease payments made at or before lease commencement less any lease incentives.

The Company’s right-of-use assets, lease liabilities and other supplemental balance sheet information associated with its operating leases as of March 31, 2020 and December 31, 2019 are summarized in the table below.

March 31,

December 31,

2020

2019

(dollars in thousands)

Right-of-use assets ⁽¹⁾

$
41,532

$
41,698

Lease liabilities ⁽¹⁾

$
46,406

$
46,391

Weighted average lease term

35.6
years

35.9
years
Weighted average discount rate

4.74
%

4.74
%

~~(1)~~

~~Right-of-use assets and lease liabilities are included in Other assets, net and Accounts payable, accrued expenses and other liabilities, respectively, on the Company’s consolidated balance sheets.~~

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For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, the Company’s lease cost consists of the following ~~components, each of which is included in Property operating expenses within the Company’s consolidated statements of operations:~~components:


	Three Months Ended March 31,				Three Months Ended March 31,
	2020		2019		2021		2020

	(in thousands)				(in thousands)
Finance lease cost:
Amortization of finance lease right-of-use assets					$	241	$	—
Interest expense related to finance lease liabilities						526		—
Operating lease cost	$	746	$	980		822		746
Short-term lease cost ⁽¹⁾		308		296		306		308
Total lease cost	$	1,054	$	1,276	$	1,895	$	1,054

(1)

Represents automobile leases that have a lease term of 12 months. The Company has made an accounting policy election not to apply the recognition requirements of ASC 842 to this asset class. The lease cost associated with these leases is recognized on a straight-line basis over the related lease term.

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The following table represents supplemental balance sheet information related to leases as of March 31, 2021 and December 31, 2020.


	March 31,			December 31,
	2021			2020

	(dollars in thousands)
Finance Leases
Right-of-use assets included in Storage properties, net	$	41,655		$	41,896
Lease liabilities included in Lease liabilities - finance leases	$	65,710		$	65,599

Operating Leases
Right-of-use assets included in Other assets, net	$	54,989		$	55,302
Lease liabilities included in Accounts payable, accrued expenses and other liabilities	$	53,541		$	53,595

Weighted Average Lease Term (in years)
Finance leases		43.3			43.5
Operating leases		34.6			34.8

Weighted Average Discount Rate
Finance leases		3.25	%		3.25	%
Operating leases		4.47	%		4.46	%

The following table represents the future ~~operating~~ lease liability maturities as of March 31, ~~2020~~2021 (in thousands):


2020	$	1,730
			Finance		Operating
2021		2,327	$	1,520	$	1,893
2022		2,461		2,183		2,639
2023		2,523		2,183		2,690
2024		2,373		2,183		2,540
2025 and thereafter		91,241
Total operating lease payments		102,655
2025				2,224		2,539
2026 and thereafter				122,932		99,290
Total lease payments				133,225		111,591
Less: Imputed interest		(56,249)		(67,515)		(58,050)
Present value of operating lease liabilities	$	46,406
Present value of lease liabilities			$	65,710	$	53,541

During the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, the cash paid for amounts included in the measurement of lease liabilities related to the Company’s operating leases was approximately $0.5 million and $0.6 million, ~~and $0.7 million, respectively, which is~~respectively. During the three months ended March 31, 2021, the cash paid for amounts included in the measurement of lease liabilities related to the Company’s finance leases was approximately $0.4 million. There were 0 such payments during the three months ended March 31, 2020. These amounts are included as an operating cash ~~outflow~~outflows within the consolidated statements of cash flows. During the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, the Company did not enter into any lease agreements set to commence in the future.

~~14.~~15. COMMITMENTS AND CONTINGENCIES

The Company is involved in claims from time to time, which arise in the ordinary course of business. In accordance with applicable accounting guidance, management establishes an accrued liability for claim expenses, insurance retention and litigation costs when those matters present loss contingencies that are both probable and reasonably estimable. In such cases, there may be exposure to loss in excess of those amounts accrued. The estimated loss, if any, is based upon currently available information and is subject to significant judgment, a variety of assumptions, and known and unknown uncertainties. In the opinion of management, the Company has made adequate provisions for potential

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liabilities, arising from any such matters, which are included in Accounts payable, accrued expenses and other liabilities on the Company’s consolidated balance sheets.

~~15.~~16. RELATED PARTY TRANSACTIONS

The Company provides management services to certain joint ventures and other related parties. Management agreements provide for fee income to the Company based on a percentage of revenues at the managed stores. Total management fees for unconsolidated real estate ventures or other entities in which the Company held an ownership interest for the three months ended March 31, 2021 and 2020 ~~and 2019~~ totaled ~~$0.9~~$1.0 million and ~~$1.2~~$0.9 million, respectively.

The management agreements for certain joint ventures, other related parties and third-party stores provide for the reimbursement to the Company for certain expenses incurred to manage the stores. These amounts consist of amounts due for management fees, payroll, and other store expenses. The amounts due to the Company were ~~$11.5~~$15.0 million and ~~$10.5~~$13.1 million as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, and are reflected in Other assets, net on the

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Company’s consolidated balance sheets. Additionally, as discussed in note ~~12,~~13, the Company had outstanding mortgage loans receivable from consolidated joint ventures of ~~$5.0~~$26.2 million and ~~$3.1~~$21.4 million as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, which are eliminated for consolidation purposes. The Company believes that all of these related-party receivables are fully collectible.

The ~~HVPSE,~~ HVP ~~III,~~V, HVPSE, HVP IV and HHFNE operating agreements provide for acquisition, disposition and other fees payable from ~~HVPSE,~~ HVP ~~III,~~V, HVPSE, HVP IV and HHFNE to the Company upon the closing of a property transaction by ~~HVPSE,~~ HVP ~~III,~~V, HVPSE, HVP IV and HHFNE or any of their subsidiaries and completion of certain measures as defined in the operating agreements. During the three months ended March 31, 2021 and 2020, the Company recognized ~~$0.7 million in~~ fees associated with property ~~transactions. There were 0 property transaction fees recognized during the three months ended March 31, 2019.~~transactions of $0.2 million and $0.7 million, respectively. Property transaction fees are included in Other income on the consolidated statements of operations.

~~16.~~17. SUBSEQUENT EVENTS

~~Subsequent to March 31, 2020,~~On April 16, 2021, the Company ~~acquired 2~~contributed $3.4 million to acquire a 50% interest in a joint venture that owns a self-storage ~~properties~~property located in ~~Maryland (1) and New Jersey (1) for an aggregate purchase price of $65.7 million.~~

~~During and subsequent to the first quarter of 2020,~~Minnesota. In addition, the Company has ~~been impacted by the spread of~~ a novel coronavirus and the disease that it causes known as COVID-19. Since the outbreak, the Company has made operational, pricing and other necessary changes to comply with governmental mandates on a jurisdiction by jurisdiction basis within the locales that its stores operate including, but not limited to, whether its stores are permitted to remain open, protections put in place for its employees and customers, and travel restrictions. The extent to which the COVID-19 pandemic impacts the Company’s business, operations and financial results will depend on numerous evolving factors that management is not be able to predict at this time, including, among others: the duration and scope of the pandemic; actions that have been and continue to be taken by governmental entities, individuals and businesses in response$6.1 million related party loan commitment to the ~~pandemic;~~joint venture, of which $5.5 million was funded in conjunction with the impact on economic activity from the pandemic and actions taken in response thereto; the impact on capital availability and costs of capital; the health of the Company’s employees; and the effect on the Company’s customers and their ability to make rental payments.

membership interest acquisition.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 discussion of forward-looking statements, see the section in this Report entitled “Forward-Looking ~~Statements”.~~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 complete discussion of such risk factors, see the section entitled “Risk Factors” in the Parent Company’s and Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020.

Overview

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 March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, we owned ~~524~~543 self-storage properties. These properties ~~totaling~~totaled approximately ~~36.7~~38.7 million and 38.5 million rentable square feet, ~~and 523 self-storage properties totaling approximately 36.6 million rentable square feet, respectively.~~respectively, as of such dates. As of March 31, ~~2020,~~2021, 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 March 31, ~~2020,~~2021, we managed ~~707~~701 stores for third parties (including ~~105~~107 stores containing an aggregate of approximately ~~7.5~~7.6 million rentable square feet as part of ~~five~~six separate unconsolidated real estate ventures) bringing the total number of stores which we owned and/or managed to ~~1,231.~~1,244. As of March 31, ~~2020,~~2021, we managed stores for third parties in the ~~District of Columbia and the~~ following 3836 states: Alabama, Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nevada, New ~~Hampshire, New~~ Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, ~~Utah,~~ Vermont, Virginia, Washington and Wisconsin.

We derive revenues principally from rents received from customers who rent cubes at our self-storage properties under month-to-month leases. 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 to maximize revenues by managing rental rates and occupancy levels.

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.

Our results of operations may be sensitive to changes in overall economic conditions that impact consumer spending, including discretionary spending, 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, inflation 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.

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

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 ~~Florida,~~ New York, Florida, Texas and California provided approximately ~~16%~~19%, ~~16%~~15%, 9% and 8%, respectively, of total revenues for the three months ended March 31, ~~2020.~~2021.

Summary of Critical Accounting Policies and Estimates

Set forth below is a summary of the accounting policies and estimates that management believes are critical to the preparation of the unaudited 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 historical consolidated financial statements included in this Report. A summary of significant accounting policies is also provided in the aforementioned notes to our consolidated financial statements (see note 2 to the unaudited 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.

Basis of Presentation

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.

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. 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.~~cause nor substantive participating rights.

Self-Storage Properties

The Company records self-storage properties at cost less accumulated depreciation. Depreciation on the buildings 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.

When stores are acquired, the purchase price ~~and acquisition related costs are~~is allocated to the tangible and intangible assets acquired and liabilities assumed based on estimated fair values. Allocations to ~~the individual assets~~land, building and ~~liabilities~~improvements and equipment are recorded based upon their respective fair values as estimated by management.

~~In allocating~~ If appropriate, the ~~purchase price and acquisition related costs for an acquisition, the Company determines whether the acquisition includes intangible assets or liabilities. The~~ Company allocates a portion of the purchase price to an intangible asset ~~attributable~~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 ~~for an acquired property~~ has been allocated to above- or below-market lease ~~intangibles.~~intangibles associated with storage leases assumed at acquisition. Above- or below- market lease intangibles associated with assumed ground 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 ground 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 and 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

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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 three months ended March 31, ~~2020~~2021 and ~~2019.~~2020.

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 a store (or group of stores), (b) the store is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such stores, (c) an active program to locate a buyer and other actions required to complete the plan to sell the store have been initiated, (d) the sale of the store is probable and transfer of the asset is expected to be completed within one year, (e) the store 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.

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. Stores classified as held for sale are reported at the lesser of carrying value or fair value less estimated costs to sell. There were no stores classified as held for sale as of March 31, ~~2020.~~2021.

Investments in Unconsolidated Real Estate Ventures

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), cash contributions, less 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 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. The determination as to whether impairment exists requires significant management judgment about the fair value of its ownership interest. Fair value is determined through various valuation techniques, including but not limited to, discounted cash flow models, quoted market values and ~~third party~~third-party appraisals. There were no impairment losses related to the Company’s investments in unconsolidated real estate ventures recognized during the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements affecting our business, see note 2 to the consolidated financial statements.

Results of Operations

The following discussion of our results of operations should be read in conjunction with the consolidated financial statements and the accompanying notes thereto. Historical results set forth in the consolidated statements of operations reflect only the existing stores 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 periods 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

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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 March 31, ~~2020,~~2021, we owned ~~477~~511 same-store properties and 4732 non-same-store properties. For analytical presentation, all percentages are calculated using the numbers presented in the financial statements contained in this Report.

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Acquisition and Development Activities

The comparability of our results of operations is affected by the timing of acquisition and disposition activities during the periods reported. As of March 31, ~~2020~~2021 and ~~2019,~~2020, we owned ~~524~~543 and ~~494~~524 self-storage properties and related assets, respectively. The following table summarizes the change in number of owned stores from January 1, ~~2019~~2020 through March 31, ~~2020:~~2021:


	2020	2019	2021	2020

Balance - January 1	523	493	543	523
Stores acquired	1	1	—	1
Stores developed			1	—
Stores combined ⁽¹⁾			(1)	—
Balance - March 31	524	494	543	524
Stores acquired		21		2
Stores developed		2		1
Stores combined ⁽¹⁾		(1)
Balance - June 30		516		527
Stores acquired		2		—
Stores developed		1		—
Balance - September 30		519		527
Stores acquired		5		18
Stores combined ⁽²⁾				(1)
Stores sold		(1)		(1)
Balance - December 31		523		543

(1)

On ~~May 24, 2019,~~March 3, 2021, the Company completed development of a store located in Arlington, VA for a total cost of approximately $26.4 million. The developed store is located adjacent to an existing consolidated joint venture store. Given their proximity to each other, the stores have been combined in our store count, as well as for operational and reporting purposes.

(2)

On November 10, 2020, the Company acquired a store located in ~~Tempe, AZ~~Merritt Island, FL for approximately ~~$1.6 million, which~~$3.9 million. The acquired store is located ~~adjacent~~in near proximity to an existing wholly-owned store. Given their proximity to each other, the stores have been combined in our store count, as well as for operational and reporting purposes.

~~Factors That May~~ Impact ~~Results~~ of COVID-19 on the Consolidated Financial Statements and Business Operations

~~We are~~Our assessment of the impact of COVID-19 on the consolidated financial statements and business operations has not ~~aware of any material trends or uncertainties other than those risks identified~~changed materially from the description provided in Part I. Item ~~1A. "Risk Factors,"~~1. “Business,” of our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020. However, the duration and scope of the pandemic; actions that have been and continue to be taken by governmental entities, individuals and businesses in Part II. Item 1A. "Risk Factors," of this Quarterly Report on Form 10-Q, that may reasonably be expected to have a material impact, favorable or unfavorable, on our results of operations. However, dueresponse to the ~~economic impact of the recent outbreak of a novel coronavirus~~pandemic; and the ~~disease that it causes known as COVID-19~~continued impact on economic activity from the pandemic may, individually or in ~~the United States,~~aggregate, impact our ~~ability to operate our stores and our customers’ ability to make rental payments could be impacted. The impact of COVID-19 on our~~future business, financial condition, results of operations, ~~for the three months ended March 31, 2020 was not material; however, its impact on our future results of operations could be material~~access to capital and will largely depend on future developments, which are highly uncertain and cannot be predicted due to new information which may emerge concerning the severity of COVID-19, the success of actions taken to contain or treat COVID-19 and reactions by consumers, companies, governmental entities and capital markets.share price.

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Comparison of the three months ended March 31, ~~2020~~2021 to the three months ended March 31, ~~2019~~2020 (in thousands)


											Non Same-Store						Other/																								Non Same-Store						Other/
	Same-Store Property Portfolio										Properties						Eliminations				Total Portfolio										Same-Store Property Portfolio										Properties						Eliminations				Total Portfolio
							Increase/		%																		Increase/		%										%																				%
	2020			2019			(Decrease)		Change		2020			2019			2020		2019		2020			2019			(Decrease)		Change		2021			2020			Change		Change		2021			2020			2021		2020		2021			2020			Change		Change
REVENUES:
Rental income	$	130,526		$	127,778		$	2,748	2.2	%	$	10,459		$	3,814		$	—	$	—	$	140,985		$	131,592		$	9,393	7.1	%	$	147,322		$	137,414		$	9,908	7.2	%	$	15,154		$	3,571		$	—	$	—	$	162,476		$	140,985		$	21,491	15.2	%
Other property related income(1)		12,923			13,288			(365)	(2.7)	%		1,249			476			2,730		1,911		16,902			15,675			1,227	7.8	%		5,985			6,286			(301)	(4.8)	%		509			189			12,810		10,427		19,304			16,902			2,402	14.2	%
Property management fee income		—			—			—	0.0	%		—			—			6,194		5,578		6,194			5,578			616	11.0	%		—			—			—	0.0	%		—			—			7,061		6,194		7,061			6,194			867	14.0	%
Total revenues		143,449			141,066			2,383	1.7	%		11,708			4,290			8,924		7,489		164,081			152,845			11,236	7.4	%		153,307			143,700			9,607	6.7	%		15,663			3,760			19,871		16,621		188,841			164,081			24,760	15.1	%

OPERATING EXPENSES:
Property operating expenses(2)		43,822			42,213			1,609	3.8	%		4,737			2,195			7,181		7,017		55,740			51,425			4,315	8.4	%		47,779			46,824			955	2.0	%		4,815			1,735			8,634		7,181		61,228			55,740			5,488	9.8	%
NET OPERATING INCOME:		99,627			98,853			774	0.8	%		6,971			2,095			1,743		472		108,341			101,420			6,921	6.8	%		105,528			96,876			8,652	8.9	%		10,848			2,025			11,237		9,440		127,613			108,341			19,272	17.8	%

Store count		477			477							47			17							524			494							511			511							32			13							543			524
Total square footage		33,193			33,193							3,542			1,490							36,735			34,683							35,682			35,682							2,971			1,053							38,653			36,735
Period end occupancy ⁽¹⁾		91.8	%		92.0	%						75.2	%		53.3	%						90.2	%		90.2	%						94.4	%		91.3	%						76.2	%		56.7	%						93.0	%		90.2	%
Period average occupancy ⁽²⁾		91.5	%		91.3	%																										93.8	%		91.0	%
Realized annual rent per occupied sq. ft^{. (3)}	$	17.19		$	16.86
Realized annual rent per occupied sq. ft.⁽³⁾																															$	17.60		$	16.94

Depreciation and amortization																						40,838			38,442			2,396	6.2	%																						53,810			40,838			12,972	31.8	%
General and administrative																						10,365			9,147			1,218	13.3	%																						10,916			10,365			551	5.3	%
Subtotal																						51,203			47,589			3,614	7.6	%																						64,726			51,203			13,523	26.4	%

OTHER (EXPENSE) INCOME
Interest:
Interest expense on loans																						(18,681)			(17,517)			(1,164)	(6.6)	%																						(19,234)			(18,681)			(553)	(3.0)	%
Loan procurement amortization expense	Loan procurement amortization expense																					(754)			(624)			(130)	(20.8)	%	Loan procurement amortization expense																					(1,035)			(754)			(281)	(37.3)	%
Equity in (losses) earnings of real estate ventures																						(5)			261			(266)	(101.9)	%
Equity in earnings (losses) of real estate ventures																															Equity in earnings (losses) of real estate ventures																					20			(5)			25	500.0	%
Other																						619			(165)			784	475.2	%																						677			619			58	9.4	%
Total other expense																						(18,821)			(18,045)			(776)	(4.3)	%																						(19,572)			(18,821)			(751)	(4.0)	%
NET INCOME																						38,317			35,786			2,531	7.1	%																						43,315			38,317			4,998	13.0	%
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS	NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS																														NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
Noncontrolling interests in the Operating Partnership	Noncontrolling interests in the Operating Partnership																					(383)			(358)			(25)	(7.0)	%	Noncontrolling interests in the Operating Partnership																					(1,549)			(383)			(1,166)	(304.4)	%
Noncontrolling interests in subsidiaries	Noncontrolling interests in subsidiaries																					(38)			70			(108)	(154.3)	%	Noncontrolling interests in subsidiaries																					(34)			(38)			4	10.5	%
NET INCOME ATTRIBUTABLE TO THE COMPANY’S COMMON SHAREHOLDERS	NET INCOME ATTRIBUTABLE TO THE COMPANY’S COMMON SHAREHOLDERS																				$	37,896		$	35,498		$	2,398	6.8	%	NET INCOME ATTRIBUTABLE TO THE COMPANY’S COMMON SHAREHOLDERS																				$	41,732		$	37,896		$	3,836	10.1	%

(1)	~~Represents occupancy at March 31st of the respective period.~~Protection plan revenue, which historically has been included in our same-store and non same-store portfolio results, is now recorded in indirect property overhead. Prior periods have been adjusted for comparability.

(2)	~~Represents~~For comparability purposes, current year amounts related to the ~~weighted average occupancy~~expiration of certain real estate tax abatements have been excluded from the same-store portfolio results ($60k for the ~~period.~~three months ended March 31, 2021).

(3)	Realized annual rent per occupied square foot is computed by dividing rental income by the weighted average occupied square feet for the period.

Revenues

Rental income increased from ~~$131.6 million during the three months ended March 31, 2019 to~~ $141.0 million during the three months ended March 31, 2020 to $162.5 million for the three months ended March 31, 2021, an increase of ~~$9.4~~$21.5 million, or ~~7.1%~~15.2%. The ~~$2.7~~$9.9 million increase in same-store rental income was primarily due ~~primarily~~ to ~~higher net rental rates. Realized annual rent per square foot on our same-store portfolio increased 2.0% as~~ a ~~result of higher rental rates for new and existing customers~~3.1% increase in average occupancy for the three months ended March 31, ~~2020~~2021 as compared to the three months ended March 31, ~~2019.~~2020. The remaining increase is primarily attributable to ~~$6.6~~$11.6 million of additional rental income from the stores acquired or opened in ~~2019~~2020 and ~~2020~~2021 included in our non-same store portfolio.

Other property related income increased from ~~$15.7 million during the three months ended March 31, 2019 to~~ $16.9 million during the three months ended March 31, 2020 to $19.3 million for the three months ended March 31, 2021, an increase of ~~$1.2~~$2.4 million, or ~~7.8%~~14.2%. The ~~$0.4~~$0.3 million decrease in same-store other property related income is mainly attributable to a ~~$0.3 million~~ decrease in fee ~~revenue and a $0.1 million decrease in merchandise sales.~~revenue. This decrease is offset by a ~~$0.8~~$0.3 million increase in other property related income derived from the stores acquired or opened in ~~2019~~2020 and ~~2020~~2021 included in our non-same store portfolio ~~and~~as well as a ~~$0.8~~$1.8 million increase ~~resulting primarily from increased~~in customer ~~insurance~~storage protection plan participation at our owned and managed stores.

Property management fee income increased from ~~$5.6 million during the three months ended March 31, 2019 to~~ $6.2 million during the three months ended March 31, 2020 to $7.1 million for the three months ended March 31, 2021, an increase of ~~$0.6~~$0.9 million, or ~~11.0%~~14.0%. This increase was ~~attributable~~primarily due to an increase in ~~management fees related~~rental income at our managed stores for the three months ended March 31, 2021 as compared to the ~~third-party management business resulting from more stores under management (707 stores as of~~three months ended March 31, ~~2020 compared to 619 stores as of March 31, 2019) and higher revenue at these managed stores.~~2020.

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Operating Expenses

Property operating expenses increased from ~~$51.4 million during the three months ended March 31, 2019 to~~ $55.7 million during the three months ended March 31, 2020 to $61.2 million for the three months ended March 31, 2021, an increase of ~~$4.3~~$5.5 million, or ~~8.4%~~9.8%. The ~~$1.6~~$1.0 million increase in property operating expenses on the same-store portfolio was primarily due to ~~increases~~an increase in ~~property taxes and advertising costs~~snow removal fees of ~~$1.2 million and $0.4 million, respectively.~~$0.8

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million. The remainder of the increase is primarily attributable to ~~$2.5~~$3.1 million of increased expenses associated with newly acquired or developed ~~stores and $0.2 million of increased expenses associated with the growth in our third-party management program.~~stores.

Depreciation and amortization increased from ~~$38.4 million during the three months ended March 31, 2019 to~~ $40.8 million during the three months ended March 31, 2020 to $53.8 million for the three months ended March 31, 2021, an increase of ~~$2.4~~$13.0 million, or ~~6.2%~~31.8%. This increase is primarily attributable to depreciation and amortization ~~expense related to stores~~associated with newly acquired ~~and~~or developed ~~during 2019 and 2020.~~stores.

General and administrative ~~expenses~~ increased from ~~$9.1 million during the three months ended March 31, 2019 to~~ $10.4 million during the three months ended March 31, 2020 to $10.9 million for the three months ended March 31, 2021, an increase of ~~$1.2~~$0.6 million, or ~~13.3%~~5.3%. ~~The change~~This increase is primarily attributable to increased personnel expenses resulting from additional employee headcount to support our growth.

Other (Expense) Income

Interest expense increased from ~~$17.5 million during the three months ended March 31, 2019 to~~ $18.7 million during the three months ended March 31, 2020 to $19.2 million for the three months ended March 31, 2021, an increase of ~~$1.2~~$0.6 million, or ~~6.6%~~3.0%. The increase is attributable to a higher amount of outstanding debt during the three months ended March 31, ~~2020 as compared to~~2021, partially offset by lower interest rates during the three months ended March 31, ~~2019.~~2021. The average outstanding debt balance increased ~~$133.3~~$382.2 million to $2,326.4 million during the three months ended March 31, 2021 as compared to $1,944.2 million during the three months ended March 31, 2020 as ~~compared to $1,810.9 million during the three months ended March 31, 2019 as~~ the result of borrowings to fund a portion of the Company’s ~~acquisition activity.~~growth. The weighted average effective interest rate on the Company’s outstanding debt for the three months ended March 31, 2021 and 2020 was 3.39% and ~~2019 was~~ 3.96% ~~and 4.10%~~, respectively.

Other income increased $0.8 million from the three months ended March 31, 2019 to the three months ended March 31, 2020, primarily due to fees earned in connection with the HVPSE property acquisitions during 2020.

Cash Flows

Comparison of the three months ended March 31, ~~2020~~2021 to the three months ended March 31, ~~2019~~2020

A comparison of cash flow from operating, investing and financing activities for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 is as follows:

Three Months Ended March 31,

Net cash provided by (used in):

2020

2019

Change

(in thousands)

Operating activities

$
80,949

$
75,458

$
5,491

Investing activities

$
(34,784)

$
(79,033)

$
44,249

Financing activities

$
(66,127)

$
3,634

$
(69,761)


	Three Months Ended March 31,
Net cash provided by (used in):	2021		2020		Change

	(in thousands)

Operating activities	$	98,182	$	80,949	$	17,233
Investing activities	$	(20,532)	$	(34,784)	$	14,252
Financing activities	$	(77,887)	$	(66,127)	$	(11,760)

Cash provided by operating activities increased from $80.9 million for the three months ended March 31, 2020 ~~and 2019 was $80.9~~to $98.2 million ~~and $75.5 million, respectively,~~for the three months ended March 31, 2021, reflecting an increase of ~~$5.5~~$17.2 million. Our increased cash flow from operating activities was primarily attributable to stores acquired and developed during ~~2019~~2020 and ~~2020, as well as~~2021 and increased net operating income levels onin the same-store portfolio in the ~~2020~~2021 period as compared to the ~~2019~~2020 period.

Cash used in investing activities decreased from ~~$79.0 million for the three months ended March 31, 2019 to~~ $34.8 million for the three months ended March 31, 2020 to $20.5 million for the three months ended March 31, 2021, reflecting a decrease of ~~$44.2~~$14.3 million. The change was primarily driven by a decrease in cash used for ~~the acquisition and development~~acquisitions of storage properties. Cash used during the three months ended March 31, 2020 related to the acquisition of one store for ~~an aggregate purchase price of~~ $9.0 million,

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~~while cash used~~ with no acquisitions closing during the three months ended March 31, 2019 related to the acquisition of one store for an aggregate purchase price of $22.0 million. Additionally, there was a $40.0 million decrease in cash used for the development of storage properties primarily due to the payment of a put liability associated with a previously consolidated development joint venture during the 2019 period. These decreases were offset by an increase in cash used for the investment in real estate ventures of $5.8 million, primarily due to our investment in HVPSE, a newly formed unconsolidated real estate venture that acquired its initial assets in the first quarter of 2020.2021.

Cash used in financing activities was $77.9 million for the three months ended March 31, 2021 compared to $66.1 million ~~during~~for the three months ended March 31, 2020, ~~compared to $3.6 million~~reflecting an increase of ~~cash provided by financing activities during the three months ended March 31, 2019, reflecting a change of $69.8~~$11.8 million. This change is primarily the result of ~~$347.7~~a $65.0 million ~~of net proceeds from our issuance of unsecured senior notes~~increase in January 2019, with no comparable cash inflow during the 2020 period, as well as a decrease of $24.7 million in proceeds received from the issuance of common shares during the three months ended March 31, 2020 compared to the three months ended March 31, 2019. These reductions in cash inflows were offset by a $200.0 million cash payment made to repay our unsecured term loan in January 2019 and $99.4 million of net revolving credit facility payments during the three months ended March 31, ~~2019~~2021 compared to the three months ended March 31, 2020. Additionally, principal payments on mortgage loans increased $44.0 million from the three months ended March 31, 2020 to the three months ended March 31, 2021 resulting primarily from the repayment of two secured loans during the 2021 period with no comparable ~~payments~~repayments during the 2020 period. These increases in cash outflows were offset by $99.7 million of net proceeds received from the issuance of

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common shares under our “at-the-market” equity program during the three months ended March 31, ~~2020.~~2021, with no comparable cash inflows during the 2020 period.

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 and management fees 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~~could 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 REIT taxable income, excluding capital gains, to its shareholders on an annual basis or pay federal income tax. 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 term and the 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 development of new stores. These funding requirements will vary from year to year, in some cases significantly. For the remainder of the ~~2020~~2021 fiscal year, we expect recurring capital expenditures to be approximately ~~$10.0~~$8.0 million to ~~$15.0~~$13.0 million, planned capital improvements and store upgrades to be approximately ~~$17.0~~$7.0 million to ~~$22.0~~$12.0 million and costs associated with the development of new stores to be approximately ~~$30.0~~$20.0 million to ~~$45.0~~$30.0 million. Our currently scheduled principal payments on our outstanding debt are approximately ~~$12.2~~$1.7 million for the remainder of ~~2020.~~2021.

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 Credit Facility 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 ~~2020~~2021 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 Amended and Restated Credit Facility, 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.

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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 March 31, ~~2020,~~2021, we had approximately ~~$35.7~~$3.7 million in available cash and cash equivalents. In addition, we had approximately ~~$749.3~~$696.6 million of availability for borrowings under our Amended and Restated Credit Facility.

~~We are continuing to monitor the outbreak~~38

Table of COVID-19 and its impact on our business, customers and industry as a whole. The magnitude and duration of the pandemic and its impact on our operations and liquidity is uncertain as of the filing date of this Quarterly Report on Form 10-Q. After considering the needs and health of our employees and customers, we have made operational and pricing changes as needed in order to ensure that all of our stores remain open for business in jurisdictions where they are legally allowed to operate. While the impact of COVID-19 on our results of operations for the three months ended March 31, 2020 was not material, we anticipate that if the outbreak and related economic impact continue on their current trajectory for an extended period of time, we will see reductions in net rentals, occupancy and our customers’ ability to make rental payments, all of which would adversely impact our cash flow from operations and could become material.Contents

Unsecured Senior Notes

Our unsecured senior notes, which are issued by the Operating Partnership and guaranteed by the Parent Company, are summarized as follows (collectively referred to as the “Senior Notes”):


	March 31,		December 31,		Effective		Issuance	Maturity	March 31,		December 31,		Effective		Issuance	Maturity
Unsecured Senior Notes	2020		2019		Interest Rate		Date	Date	2021		2020		Interest Rate		Date	Date

	(in thousands)								(in thousands)
$250M 4.800% Guaranteed Notes due 2022	$	250,000	$	250,000	4.82	%	Jun-12	Jul-22
$300M 4.375% Guaranteed Notes due 2023 ⁽¹⁾		300,000		300,000	4.33	%	Various ⁽¹⁾	Dec-23	$	300,000	$	300,000	4.33	%	Various ⁽¹⁾	Dec-23
$300M 4.000% Guaranteed Notes due 2025 ⁽²⁾		300,000		300,000	3.99	%	Various ⁽²⁾	Nov-25		300,000		300,000	3.99	%	Various ⁽²⁾	Nov-25
$300M 3.125% Guaranteed Notes due 2026		300,000		300,000	3.18	%	Aug-16	Sep-26		300,000		300,000	3.18	%	Aug-16	Sep-26
$350M 4.375% Guaranteed Notes due 2029		350,000		350,000	4.46	%	Jan-19	Feb-29		350,000		350,000	4.46	%	Jan-19	Feb-29
$350M 3.000% Guaranteed Notes due 2030		350,000		350,000	3.04	%	Oct-19	Feb-30		350,000		350,000	3.04	%	Oct-19	Feb-30
$450M 2.000% Guaranteed Notes due 2031										450,000		450,000	2.10	%	Oct-20	Feb-31
Principal balance outstanding		1,850,000		1,850,000						2,050,000		2,050,000
Less: Discount on issuance of unsecured senior notes, net		(3,759)		(3,860)						(7,278)		(7,470)
Less: Loan procurement costs, net		(10,018)		(10,415)						(11,723)		(12,158)
Total unsecured senior notes, net	$	1,836,223	$	1,835,725					$	2,030,999	$	2,030,372

(1)

(2)

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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 March 31, ~~2020,~~2021, the Operating Partnership was in compliance with all of the financial covenants under the Senior Notes.

Revolving Credit Facility ~~and Unsecured Term Loans~~

On December 9, 2011, we entered into a credit agreement (the “Credit Facility”), which was subsequently amended on April 5, 2012, June 18, 2013 and April 22, 2015 to provide for, among other things, a $200.0 million unsecured term loan with a maturity date of January 31, 2019 and a $500.0 million unsecured revolving facility with a maturity date of April 22, 2020.. On June 19, 2019, we amended and restated, in its entirety, the Credit Facility (the “Amended and Restated Credit Facility”) which, subsequent to the amendment and restatement, is comprised of a $750.0 million unsecured revolving facility (the “Revolver”) maturing on June 19, 2024. Under the Amended and Restated Credit Facility, pricing on the Revolver is dependent upon our unsecured debt credit ratings. At the Company’s current Baa2/BBB level, amounts drawn under the Revolver are priced at 1.10% over LIBOR, inclusive of a facility fee of 0.15%. We incurred costs of $3.9 million in 2019 in connection with amending and restating the Credit Facility and capitalized such costs as a component of Loan procurement costs, net of amortization on the consolidated balance sheets.

~~On January 31, 2019, we used a portion~~39

On June 20, 2011, we entered into an unsecured term loan agreement (the “Term Loan Facility”), which was subsequently amended on June 18, 2013 and August 5, 2014, consisting of, among other things, a $100.0 million unsecured term loan that was scheduled to mature in January 2020. On June 19, 2019, we used an initial advance at closing of the Amended and Restated Credit Facility to repay all of the outstanding indebtedness under the unsecured term loan portion of the Term Loan Facility. Unamortized loan procurement costs of $0.1 million were written off in conjunction with the repayment.

Under the 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 March 31, ~~2020,~~2021, we were in compliance with all of our financial covenants.

At-the-Market Equity Program

We maintain an “at-the-market” equity program that enables us to sell up to 60.0 million common shares through sales agents pursuant to equity distribution agreements (the “Equity Distribution Agreements”).

~~We did not sell any common shares under the Equity Distribution Agreements during~~During the three months ended March 31, ~~2020.~~2021, we sold a total of 2.8 million common shares at an average sales price of $35.52 per share, resulting in net proceeds of $99.7 million, after deducting offering costs. We used the proceeds from the 2021 sales under the program to fund the development of self-storage properties and for general corporate purposes. As of March 31, ~~2020, 14.6~~2021, 8.1 million common shares remained available for issuance under the Equity Distribution Agreements.

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Recent Developments

~~Subsequent~~On April 16, 2021, we contributed $3.4 million to ~~March 31, 2020, we acquired two~~acquire a 50% interest in a joint venture that owns a self-storage ~~properties~~property located in ~~Maryland (1) and New Jersey (1) for an aggregate purchase price~~Minnesota. In addition, we have a $6.1 million related party loan commitment to the joint venture, of ~~$65.7 million.~~which $5.5 million was funded in conjunction with the membership interest acquisition.

During and subsequent to the first quarter of 2020, our business has been impacted by the spread of a novel coronavirus and the disease that it causes known as COVID-19. Since the outbreak, we have made operational, pricing and other necessary changes to comply with governmental mandates on a jurisdiction by jurisdiction basis within the locales that our stores operate including, but not limited to, whether our stores are permitted to remain open, protections put in place for our employees and customers, and travel restrictions. The extent to which the COVID-19 pandemic impacts our business, operations and financial results will depend on numerous evolving factors we are not able to predict at this time, including: the duration and scope of the pandemic; actions that have been and continue to be taken by governmental entities, individuals and buisnesses in response to the pandemic; the impact on economic activity from the pandemic and actions taken in response thereto; the health of our employees; and, the effect on our customers and their ability to make rental payments.

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, loan procurement amortization expense - early repayment 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): gains from sale 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:

●

it is one of the primary measures used by our management and our store managers 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;

●

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

●

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.

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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.

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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 (the “White Paper”), 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 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.~~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 the analyst community considers 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.

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The following table presents a reconciliation of net income attributable to the Company’s common shareholders to FFO (and FFO, as adjusted) attributable to common shareholders and OP unitholders for the three months ended March 31, ~~2020~~2021 and ~~2019 (in thousands).~~2020.


	Three Months Ended March 31,				Three Months Ended March 31,
	2020		2019		2021		2020

					(in thousands)
Net income attributable to the Company’s common shareholders	$	37,896	$	35,498	$	41,732	$	37,896

Add:
Real estate depreciation and amortization:
Real property		40,008		37,726		52,852		40,008
Company’s share of unconsolidated real estate ventures		1,709		1,944		1,873		1,709
Noncontrolling interests in the Operating Partnership		383		358		1,549		383
FFO attributable to common shareholders and OP unitholders ⁽¹⁾	$	79,996	$	75,526
FFO attributable to common shareholders and OP unitholders					$	98,006	$	79,996

Add:
Loss on early repayment of debt ⁽¹⁾						423		—
FFO, as adjusted, attributable to common shareholders and OP unitholders					$	98,429	$	79,996

Weighted average diluted shares outstanding		194,264		187,984		200,233		194,264
Weighted average diluted units outstanding		1,972		1,927		7,384		1,972
Weighted average diluted shares and units outstanding		196,236		189,911		207,617		196,236

(1)

~~There were no adjustments from FFO attributable to common shareholders and OP unitholders to FFO, as adjusted, attributable to common shareholders and OP unitholders for~~For the three months ended March 31, ~~2020 and 2019.~~2021, loss on early repayment of debt relates to $0.4 million of costs that are included in the Company's share of equity in earnings (losses) of real estate ventures.

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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our future income, cash flows and fair values relevant to financial instruments depend upon prevailing market interest rates.

Market Risk

Our investment policy relating to cash and cash equivalents is to preserve principal and liquidity while maximizing the return through investment of available funds.

Effect of Changes in Interest Rates on our Outstanding Debt

Our interest rate risk objectives are to limit the impact of interest rate fluctuations on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, we manage our exposure to fluctuations in market interest rates for a portion of our borrowings through the use of derivative financial instruments such as interest rate swaps or caps to mitigate our interest rate risk on a related financial instrument or to effectively lock the interest rate on a portion of our ~~variable rate~~variable-rate debt. The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market rates. The range of changes chosen reflects our view of changes which are reasonably possible over a one-year period. Market values are the present value of projected future cash flows based on the market rates chosen.

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As of March 31, ~~2020,~~2021, our consolidated debt consisted of ~~$1,943.9~~$2,208.1 million of outstanding mortgage loans and notes payable and unsecured senior notes that are subject to fixed rates. ~~Borrowings under our Revolver are~~Additionally, as of March 31, 2021, there were $52.8 million of outstanding unsecured credit facility borrowings subject to floating rates. Changes in market interest rates have different impacts on the fixed and ~~variable rate~~variable-rate portions of our debt

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portfolio. A change in market interest rates on the fixed portion of the debt portfolio impacts the net financial instrument position, but has no impact on interest incurred or cash flows. A change in market interest rates on the variable portion of the debt portfolio impacts the interest incurred and cash flows, but does not impact the net financial instrument position.

If market interest rates on our variable-rate debt increase by 100 basis points, the increase in annual interest expense on our variable-rate debt would decrease future earnings and cash flows by approximately $0.5 million a year. If market interest rates on our variable-rate debt decrease by 100 basis points, the decrease in interest expense on our variable-rate debt would increase future earnings and cash flows by approximately $0.5 million a year.

If market interest rates increase by 100 basis points, the fair value of our outstanding fixed-rate mortgage debt and unsecured senior notes would decrease by approximately ~~$106.4~~$131.1 million. If market rates of interest decrease by 100 basis points, the fair value of our outstanding fixed-rate mortgage debt and unsecured senior notes would increase by approximately ~~$117.6~~$140.9 million.

ITEM 4. CONTROLS AND PROCEDURES

Controls and Procedures (Parent Company)

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Report, the Parent Company carried out an evaluation, under the supervision and with the participation of its management, including its chief executive officer and chief financial officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) under the Exchange Act).

Based on that evaluation, the Parent Company’s chief executive officer and chief financial officer have concluded that the Parent Company’s disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information required to be disclosed by the Parent Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to the Parent Company’s management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in the Parent Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during its most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

Controls and Procedures (Operating Partnership)

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Report, the Operating Partnership carried out an evaluation, under the supervision and with the participation of its management, including the Operating Partnership’s chief executive officer and chief financial officer, of the effectiveness of the design and operation of the Operating Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) under the Exchange Act).

Based on that evaluation, the Operating Partnership’s chief executive officer and chief financial officer have concluded that the Operating Partnership’s disclosure controls and procedures are designed at a reasonable assurance

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level and are effective to provide reasonable assurance that information required to be disclosed by the Operating Partnership in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to the Operating Partnership’s management, including the Operating Partnership’s chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

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Changes in Internal Control Over Financial Reporting

There has been no change in the Operating Partnership’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during its most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

To our knowledge and except as otherwise disclosed in this quarterly report, no legal proceedings are pending against us, other than routine actions and administrative proceedings, and other actions not deemed material, and which, in the aggregate, are not expected to have a material adverse effect on our financial condition, results of operations or cash flows.

ITEM ~~1A. RISK FACTORS~~

~~With the exception of the following, there have been no material changes to the risk factors disclosed in Part I. Item 1A. of the Company’s~~ ~~Annual Report on Form 10-K for the year ended December 31, 2019~~.

~~Our business, financial condition,results of operations and share price have, and may continue to be, impacted by the COVID-19 pandemic and such impact could be materially adverse.~~

During and subsequent to the first quarter of 2020, the world has been impacted by the spread of a novel strain of coronavirus and the disease that it causes known as COVID-19, which has resulted in global business disruptions and significant volatility in U.S. and international debt and equity markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. economy. The extent to which the COVID-19 pandemic ultimately impacts our business, results of operations, financial condition and share price will depend on numerous evolving factors that are highly uncertain and are unable to be predicted at this time, including, among others: the duration and scope of the pandemic; actions that have been and continue to be taken by governmental entities, individuals and businesses in response to the pandemic; the impact on economic activity from the pandemic and actions taken in response thereto; the impact on capital availability and costs of capital; the impact on our employees any other operational disruptions or difficulties we may face; and, the effect on our customers and their ability to make rental payments. Any of these events, individually or in aggregate, could have a material adverse impact on the Company’s business, financial condition, results of operations and share price.

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~~ITEM~~ 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Repurchases of Parent Company Common Shares

The following table provides information about repurchases of the Parent Company’s common shares during the three months ended March 31, ~~2020:~~2021:


	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs

January 1 - January 31	17,407	$	31.47	N/A	3,000,000	19,450	$	33.95	N/A	3,000,000
February 1 - February 29	2,352	$	32.71	N/A	3,000,000
February 1 - February 28						1,832	$	35.84	N/A	3,000,000
March 1 - March 31	281	$	22.79	N/A	3,000,000	85	$	37.29	N/A	3,000,000
Total	20,040	$	31.49	N/A	3,000,000	21,367	$	34.12	N/A	3,000,000

(1)

Represents common shares withheld by the Parent Company upon the vesting of restricted shares to cover employee tax obligations.

On September 27, 2007, the Parent Company announced that the Board of Trustees (the “Board”) approved a share repurchase program for up to 3.0 million of the Parent Company’s outstanding common shares. Unless terminated earlier by resolution of the Board, ~~of Trustees,~~ the program will expire when the number of authorized shares has been repurchased. The Parent Company has made no repurchases under this program to date.

~~ITEM 5. OTHER INFORMATION~~

Exhibit 99.1 (Material United States Federal Income Tax Considerations) filed with this Quarterly Report on Form 10-Q replaces Exhibit 99.1 (Material United States Federal Income Tax Considerations) to the ~~Annual Report on Form 10-K for the fiscal year ended December 31, 2019~~ ~~to reflect recent legislative changes under the Coronavirus Aid, Relief, and Economic Security Act, which was signed into law on March 27, 2020.~~

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ITEM 6. EXHIBITS

Exhibit No.		Exhibit Description

~~10.1~~		Second Amended and Restated Equity Distribution Agreement, dated March 4, 2020, by and among CubeSmart, CubeSmart, L.P. and Wells Fargo Securities, LLC, incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K, filed on March 4, 2020.

~~10.2~~		Second Amended and Restated Equity Distribution Agreement, dated March 4, 2020, by and among CubeSmart, CubeSmart, L.P. and BofA Securities, Inc., incorporated by reference to Exhibit 1.2 to the Company’s Current Report on Form 8-K, filed on March 4, 2020.

~~10.3~~		Second Amended and Restated Equity Distribution Agreement, dated March 4, 2020, by and among CubeSmart, CubeSmart, L.P. and BMO Capital Markets Corp., incorporated by reference to Exhibit 1.3 to the Company’s Current Report on Form 8-K, filed on March 4, 2020.

~~10.4~~		Second Amended and Restated Equity Distribution Agreement, dated March 4, 2020, by and among CubeSmart, CubeSmart, L.P. and Jefferies LLC, incorporated by reference to Exhibit 1.4 to the Company’s Current Report on Form 8-K, filed on March 4, 2020.

~~10.5~~		Second Amended and Restated Equity Distribution Agreement, dated March 4, 2020, by and among CubeSmart, CubeSmart, L.P. and Barclays Capital Inc., incorporated by reference to Exhibit 1.5 to the Company’s Current Report on Form 8-K, filed on March 4, 2020.

31.1		Certification of Chief Executive Officer of CubeSmart as required by Rule 13a-14(a)/15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)

31.2		Certification of Chief Financial Officer of CubeSmart as required by Rule 13a-14(a)/15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)

31.3		Certification of Chief Executive Officer of CubeSmart, L.P., as required by Rule 13a-14(a)/15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)

31.4		Certification of Chief Financial Officer of CubeSmart, L.P., as required by Rule 13a-14(a)/15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)

32.1		Certification of Chief Executive Officer and Chief Financial Officer of CubeSmart pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (furnished herewith)

32.2		Certification of Chief Executive Officer and Chief Financial Officer of CubeSmart, L.P., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (furnished herewith)

~~99.1~~		~~Material United States Federal Income Tax Considerations (filed herewith)~~

101		The following CubeSmart and CubeSmart, L.P. financial information for the three months ended March 31, ~~2020,~~2021, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the ~~Condensed~~ Consolidated Balance Sheets, (ii) the ~~Condensed~~ Consolidated Statements of Operations, (iii) the ~~Condensed~~ Consolidated Statements of Cash Flows, and (iv) the Notes to ~~Condensed~~Unaudited Consolidated Financial Statements, tagged as blocks of text. (filed herewith)

104		Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

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SIGNATURES OF REGISTRANT

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CUBESMART
	(Registrant)


Date: ~~May 8, 2020~~April 30, 2021	By:	/s/ Christopher P. Marr

		Christopher P. Marr, Chief Executive Officer
		(Principal Executive Officer)



Date: ~~May 8, 2020~~April 30, 2021	By:	/s/ Timothy M. Martin

		Timothy M. Martin, Chief Financial Officer
		(Principal Financial Officer)

SIGNATURES OF REGISTRANT

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	CUBESMART, L.P.
	(Registrant)


Date: ~~May 8, 2020~~April 30, 2021	By:	/s/ Christopher P. Marr

		Christopher P. Marr, Chief Executive Officer
		(Principal Executive Officer)



Date: ~~May 8, 2020~~April 30, 2021	By:	/s/ Timothy M. Martin

		Timothy M. Martin, Chief Financial Officer
		(Principal Financial Officer)

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