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 September 30, 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 November 3, 2021
Common shares, $0.01 par value per share, of CubeSmart	203,285,723

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended September 30, 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 September 30, 2021, owned a 96.7% interest in the Operating Partnership. The remaining 3.3% 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.

2

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.

3

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	37
Item 3. Quantitative and Qualitative Disclosures About Market Risk	49
Item 4. Controls and Procedures	50
Part II. OTHER INFORMATION
Item 1. Legal Proceedings	51
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 6. Exhibits	52

Filing Format

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

4

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

5

● 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;

● 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 or recovery from insurance 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, 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.

6

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CUBESMART AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	September 30,		December 31,
	2021		2020
	(unaudited)
ASSETS
Storage properties	$	5,573,816	$	5,489,754
Less: Accumulated depreciation		(1,047,322)		(983,940)
Storage properties, net (including VIE assets of $160,317 and $119,345, respectively)		4,526,494		4,505,814
Cash and cash equivalents		20,332		3,592
Restricted cash		39,738		2,637
Loan procurement costs, net of amortization		2,587		3,275
Investment in real estate ventures, at equity		111,354		92,071
Assets held for sale		1,180		—
Other assets, net		134,369		170,753
Total assets	$	4,836,054	$	4,778,142
LIABILITIES AND EQUITY
Unsecured senior notes, net	$	2,032,253	$	2,030,372
Revolving credit facility		—		117,800
Mortgage loans and notes payable, net		168,855		216,504
Lease liabilities - finance leases		65,807		65,599
Accounts payable, accrued expenses and other liabilities		177,328		159,140
Distributions payable		71,696		68,301
Deferred revenue		33,871		29,087
Security deposits		1,105		1,077
Liabilities held for sale		81		—
Total liabilities		2,550,996		2,687,880
Noncontrolling interests in the Operating Partnership		339,557		249,414
Commitments and contingencies
Equity
Common shares $.01 par value, 400,000,000 shares authorized, 203,284,756 and 197,405,989 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		2,033		1,974
Additional paid-in capital		3,037,520		2,805,673
Accumulated other comprehensive loss		(575)		(632)
Accumulated deficit		(1,113,025)		(974,799)
Total CubeSmart shareholders’ equity		1,925,953		1,832,216
Noncontrolling interests in subsidiaries		19,548		8,632
Total equity		1,945,501		1,840,848
Total liabilities and equity	$	4,836,054	$	4,778,142

See accompanying notes to the unaudited consolidated financial statements.

7

CUBESMART AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
REVENUES
Rental income	$	182,409	$	146,507	$	515,244	$	427,976
Other property related income		21,892		18,916		62,414		52,340
Property management fee income		8,263		7,088		22,994		20,074
Total revenues		212,564		172,511		600,652		500,390
OPERATING EXPENSES
Property operating expenses		64,065		57,101		189,044		168,186
Depreciation and amortization		55,871		38,084		163,820		118,815
General and administrative		12,095		10,193		34,571		30,101
Total operating expenses		132,031		105,378		387,435		317,102
OTHER (EXPENSE) INCOME
Interest:
Interest expense on loans		(19,122)		(18,984)		(57,468)		(56,367)
Loan procurement amortization expense		(1,012)		(753)		(3,059)		(2,260)
Equity in earnings (losses) of real estate ventures		816		(37)		1,152		(216)
Gains from sales of real estate, net		28,815		—		28,815		—
Other		539		45		1,593		208
Total other income (expense)		10,036		(19,729)		(28,967)		(58,635)
NET INCOME		90,569		47,404		184,250		124,653
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
Noncontrolling interests in the Operating Partnership		(3,149)		(474)		(6,466)		(1,246)
Noncontrolling interest in subsidiaries		230		(39)		350		(115)
NET INCOME ATTRIBUTABLE TO THE COMPANY’S COMMON SHAREHOLDERS	$	87,650	$	46,891	$	178,134	$	123,292
Basic earnings per share attributable to common shareholders	$	0.43	$	0.24	$	0.89	$	0.64
Diluted earnings per share attributable to common shareholders	$	0.43	$	0.24	$	0.88	$	0.63
Weighted average basic shares outstanding		202,194		193,745		200,934		193,652
Weighted average diluted shares outstanding		203,797		194,539		202,291		194,386

See accompanying notes to the unaudited consolidated financial statements.

8

CUBESMART AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
NET INCOME	$	90,569	$	47,404	$	184,250	$	124,653
Other comprehensive income:
Reclassification of realized losses on interest rate swaps		20		20		60		60
OTHER COMPREHENSIVE INCOME:		20		20		60		60
COMPREHENSIVE INCOME		90,589		47,424		184,310		124,713
Comprehensive income attributable to noncontrolling interests in the Operating Partnership		(3,150)		(474)		(6,469)		(1,246)
Comprehensive loss (income) attributable to noncontrolling interest in subsidiaries		230		(39)		350		(115)
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE COMPANY	$	87,669	$	46,911	$	178,191	$	123,352

See accompanying notes to the unaudited consolidated financial statements.

9

CUBESMART AND SUBSIDIARIES

CONSOLIDATED 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, 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							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
Contributions from noncontrolling interests in subsidiaries													5,104		5,104
Distributions paid to noncontrolling interests in subsidiaries													(38)		(38)
Issuance of common shares, net	1,046		11		42,418						42,429				42,429
Issuance of restricted shares	31
Conversion from units to shares	81		1		3,548						3,549				3,549		(3,549)
Exercise of stock options	189		2		4,073						4,075				4,075
Amortization of restricted shares					1,383						1,383				1,383
Share compensation expense					544						544				544
Adjustment for noncontrolling interests in the Operating Partnership									(63,025)		(63,025)				(63,025)		63,025
Net income (loss)									48,752		48,752		(154)		48,598		1,768
Other comprehensive income							19				19				19		1
Common share distributions ($0.34 per share)									(68,804)		(68,804)				(68,804)		(2,477)
Balance at June 30, 2021	201,769	$	2,018	$	2,961,696	$	(594)	$	(1,116,596)	$	1,846,524	$	13,509	$	1,860,033	$	337,417
Contributions from noncontrolling interests in subsidiaries													6,300		6,300
Distributions paid to noncontrolling interests in subsidiaries													(31)		(31)
Issuance of common shares, net	1,100		11		57,834						57,845				57,845
Issuance of restricted shares	2
Conversion from units to shares	276		3		13,390						13,393				13,393		(13,393)
Exercise of stock options	138		1		2,617						2,618				2,618
Amortization of restricted shares					1,424						1,424				1,424
Share compensation expense					559						559				559
Adjustment for noncontrolling interests in the Operating Partnership									(14,764)		(14,764)				(14,764)		14,764
Net income (loss)									87,650		87,650		(230)		87,420		3,149
Other comprehensive income, net							19				19				19		1
Common share distributions ($0.34 per share)									(69,315)		(69,315)				(69,315)		(2,381)
Balance at September 30, 2021	203,285	$	2,033	$	3,037,520	$	(575)	$	(1,113,025)	$	1,925,953	$	19,548	$	1,945,501	$	339,557

See accompanying notes to the unaudited consolidated financial statements.

10

CUBESMART AND SUBSIDIARIES

CONSOLIDATED 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, net					(118)						(118)				(118)
Issuance of restricted shares	30
Amortization of restricted shares					710						710				710
Share compensation expense					530						530				530
Adjustment for noncontrolling interest 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							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
Distributions paid to noncontrolling interests in subsidiaries													(42)		(42)
Issuance of common shares, net					(70)						(70)				(70)
Issuance of restricted shares	28
Conversion from units to shares	100		1		2,823						2,824				2,824		(2,824)
Exercise of stock options	14				135						135				135
Amortization of restricted shares					1,249						1,249				1,249
Share compensation expense					464						464				464
Adjustment for noncontrolling interest in the Operating Partnership									(615)		(615)				(615)		615
Net income									38,505		38,505		38		38,543		389
Other comprehensive income							20				20				20
Common share distributions ($0.33 per share)									(64,081)		(64,081)				(64,081)		(618)
Balance at June 30, 2020	193,729	$	1,937	$	2,680,468	$	(689)	$	(920,964)	$	1,760,752	$	7,965	$	1,768,717	$	51,407
Distributions paid to noncontrolling interests in subsidiaries													(60)		(60)
Issuance of common shares, net					(44)						(44)				(44)
Issuance of restricted shares	1
Issuance of OP units																	9,000
Exercise of stock options	18				491						491				491
Amortization of restricted shares					1,277						1,277				1,277
Share compensation expense					479						479				479
Adjustment for noncontrolling interest in the Operating Partnership									(9,312)		(9,312)				(9,312)		9,312
Net income									46,891		46,891		39		46,930		474
Other comprehensive income, net							20				20				20
Common share distributions ($0.33 per share)									(64,092)		(64,092)				(64,092)		(620)
Balance at September 30, 2020	193,748	$	1,937	$	2,682,671	$	(669)	$	(947,477)	$	1,736,462	$	7,944	$	1,744,406	$	69,573

See accompanying notes to the unaudited consolidated financial statements.

11

CUBESMART AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2021		2020
Operating Activities
Net income	$	184,250	$	124,653
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		166,879		121,075
Non-cash portion of interest expense related to finance leases		208		—
Equity in (earnings) losses of real estate ventures		(1,152)		216
Gains from sales of real estate, net		(28,815)		—
Equity compensation expense		6,067		5,374
Accretion of fair market value adjustment of debt		(1,630)		(530)
Changes in other operating accounts:
Other assets		(7,034)		(6,964)
Accounts payable and accrued expenses		19,397		21,854
Other liabilities		4,770		2,153
Net cash provided by operating activities	$	342,940	$	267,831
Investing Activities
Acquisitions of storage properties		(65,455)		(82,968)
Additions and improvements to storage properties		(27,928)		(41,968)
Development costs		(60,783)		(34,163)
Investment in real estate ventures		(28,256)		(5,914)
Cash distributed from real estate ventures		15,125		4,566
Proceeds from sale of real estate, net		37,348		—
Net cash used in investing activities	$	(129,949)	$	(160,447)
Financing Activities
Proceeds from:
Revolving credit facility		667,658		273,774
Principal payments on:
Revolving credit facility		(785,458)		(236,474)
Mortgage loans and notes payable		(45,791)		(1,898)
Proceeds from issuance of common shares, net		199,962		(232)
Cash paid upon vesting of restricted shares		(843)		(665)
Exercise of stock options		7,865		626
Contributions from noncontrolling interests in subsidiaries		8,031		—
Distributions paid to noncontrolling interests in subsidiaries		(138)		(161)
Distributions paid to common shareholders		(204,522)		(192,160)
Distributions paid to noncontrolling interests in Operating Partnership		(5,914)		(1,917)
Net cash used in financing activities	$	(159,150)	$	(159,107)
Change in cash, cash equivalents and restricted cash		53,841		(51,723)
Cash, cash equivalents and restricted cash at beginning of period		6,229		58,441
Cash, cash equivalents and restricted cash at end of period	$	60,070	$	6,718
Supplemental Cash Flow and Noncash Information
Cash paid for interest, net of interest capitalized	$	63,610	$	62,937
Supplemental disclosure of noncash activities:
Acquisitions of storage properties	$	—	$	(2,623)
Accretion of put liability	$	7,333	$	4,716
Derivative valuation adjustment	$	60	$	60
Issuance of OP units (see note 4)	$	—	$	9,000
Contributions from noncontrolling interests in subsidiaries	$	3,373	$	—

See accompanying notes to the unaudited consolidated financial statements.

12

CUBESMART, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)

	September 30,		December 31,
	2021		2020
	(unaudited)
ASSETS
Storage properties	$	5,573,816	$	5,489,754
Less: Accumulated depreciation		(1,047,322)		(983,940)
Storage properties, net (including VIE assets of $160,317 and $119,345, respectively)		4,526,494		4,505,814
Cash and cash equivalents		20,332		3,592
Restricted cash		39,738		2,637
Loan procurement costs, net of amortization		2,587		3,275
Investment in real estate ventures, at equity		111,354		92,071
Assets held for sale		1,180		—
Other assets, net		134,369		170,753
Total assets	$	4,836,054	$	4,778,142
LIABILITIES AND CAPITAL
Unsecured senior notes, net	$	2,032,253	$	2,030,372
Revolving credit facility		—		117,800
Mortgage loans and notes payable, net		168,855		216,504
Lease liabilities - finance leases		65,807		65,599
Accounts payable, accrued expenses and other liabilities		177,328		159,140
Distributions payable		71,696		68,301
Deferred revenue		33,871		29,087
Security deposits		1,105		1,077
Liabilities held for sale		81		—
Total liabilities		2,550,996		2,687,880
Limited Partnership interests of third parties		339,557		249,414
Commitments and contingencies
Capital
Operating Partner		1,926,528		1,832,848
Accumulated other comprehensive loss		(575)		(632)
Total CubeSmart, L.P. capital		1,925,953		1,832,216
Noncontrolling interests in subsidiaries		19,548		8,632
Total capital		1,945,501		1,840,848
Total liabilities and capital	$	4,836,054	$	4,778,142

See accompanying notes to the unaudited consolidated financial statements.

13

CUBESMART, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per common unit data)

(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
REVENUES
Rental income	$	182,409	$	146,507	$	515,244	$	427,976
Other property related income		21,892		18,916		62,414		52,340
Property management fee income		8,263		7,088		22,994		20,074
Total revenues		212,564		172,511		600,652		500,390
OPERATING EXPENSES
Property operating expenses		64,065		57,101		189,044		168,186
Depreciation and amortization		55,871		38,084		163,820		118,815
General and administrative		12,095		10,193		34,571		30,101
Total operating expenses		132,031		105,378		387,435		317,102
OTHER (EXPENSE) INCOME
Interest:
Interest expense on loans		(19,122)		(18,984)		(57,468)		(56,367)
Loan procurement amortization expense		(1,012)		(753)		(3,059)		(2,260)
Equity in earnings (losses) of real estate ventures		816		(37)		1,152		(216)
Gains from sales of real estate, net		28,815		—		28,815		—
Other		539		45		1,593		208
Total other income (expense)		10,036		(19,729)		(28,967)		(58,635)
NET INCOME		90,569		47,404		184,250		124,653
NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS
Noncontrolling interest in subsidiaries		230		(39)		350		(115)
NET INCOME ATTRIBUTABLE TO CUBESMART L.P.		90,799		47,365		184,600		124,538
Operating Partnership interests of third parties		(3,149)		(474)		(6,466)		(1,246)
NET INCOME ATTRIBUTABLE TO COMMON UNITHOLDERS	$	87,650	$	46,891	$	178,134	$	123,292
Basic earnings per unit attributable to common unitholders	$	0.43	$	0.24	$	0.89	$	0.64
Diluted earnings per unit attributable to common unitholders	$	0.43	$	0.24	$	0.88	$	0.63
Weighted average basic units outstanding		202,194		193,745		200,934		193,652
Weighted average diluted units outstanding		203,797		194,539		202,291		194,386

See accompanying notes to the unaudited consolidated financial statements.

14

CUBESMART, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
NET INCOME	$	90,569	$	47,404	$	184,250	$	124,653
Other comprehensive income:
Reclassification of realized losses on interest rate swaps		20		20		60		60
OTHER COMPREHENSIVE INCOME:		20		20		60		60
COMPREHENSIVE INCOME		90,589		47,424		184,310		124,713
Comprehensive income attributable to Operating Partnership interests of third parties		(3,150)		(474)		(6,469)		(1,246)
Comprehensive loss (income) attributable to noncontrolling interest in subsidiaries		230		(39)		350		(115)
COMPREHENSIVE INCOME ATTRIBUTABLE TO OPERATING PARTNER	$	87,669	$	46,911	$	178,191	$	123,352

See accompanying notes to the unaudited consolidated financial statements.

15

CUBESMART, L.P. AND SUBSIDIARIES

CONSOLIDATED 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, 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					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
Contributions from noncontrolling interests in subsidiaries									5,104		5,104
Distributions to noncontrolling interests in subsidiaries									(38)		(38)
Issuance of common OP units, net	1,046		42,429				42,429				42,429
Issuance of restricted OP units	31
Conversion from OP units to shares	81		3,549				3,549				3,549		(3,549)
Exercise of OP unit options	189		4,075				4,075				4,075
Amortization of restricted OP units			1,383				1,383				1,383
OP unit compensation expense			544				544				544
Adjustment for Limited Partnership interests of third parties			(63,025)				(63,025)				(63,025)		63,025
Net income (loss)			48,752				48,752		(154)		48,598		1,768
Other comprehensive income					19		19				19		1
Common OP unit distributions ($0.34 per unit)			(68,804)				(68,804)				(68,804)		(2,477)
Balance at June 30, 2021	201,769	$	1,847,118	$	(594)	$	1,846,524	$	13,509	$	1,860,033	$	337,417
Contributions from noncontrolling interests in subsidiaries									6,300		6,300
Distributions to noncontrolling interests in subsidiaries									(31)		(31)
Issuance of common OP units, net	1,100		57,845				57,845				57,845
Issuance of restricted OP units	2
Conversion from OP units to shares	276		13,393				13,393				13,393		(13,393)
Exercise of OP unit options	138		2,618				2,618				2,618
Amortization of restricted OP units			1,424				1,424				1,424
OP unit compensation expense			559				559				559
Adjustment for Limited Partnership interests of third parties			(14,764)				(14,764)				(14,764)		14,764
Net income (loss)			87,650				87,650		(230)		87,420		3,149
Other comprehensive income, net					19		19				19		1
Common OP unit distributions ($0.34 per unit)			(69,315)				(69,315)				(69,315)		(2,381)
Balance at September 30, 2021	203,285	$	1,926,528	$	(575)	$	1,925,953	$	19,548	$	1,945,501	$	339,557

See accompanying notes to the unaudited consolidated financial statements.

16

CUBESMART, L.P. AND SUBSIDIARIES

CONSOLIDATED 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, net			(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					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
Distributions to noncontrolling interests in subsidiaries									(42)		(42)
Issuance of common OP units, net			(70)				(70)				(70)
Issuance of restricted OP units	28
Conversion from OP units to shares	100		2,824				2,824				2,824		(2,824)
Exercise of OP unit options	14		135				135				135
Amortization of restricted OP units			1,249				1,249				1,249
OP unit compensation expense			464				464				464
Adjustment for Limited Partnership interests of third parties			(615)				(615)				(615)		615
Net income			38,505				38,505		38		38,543		389
Other comprehensive income					20		20				20
Common OP unit distributions ($0.33 per unit)			(64,081)				(64,081)				(64,081)		(618)
Balance at June 30, 2020	193,729	$	1,761,441	$	(689)	$	1,760,752	$	7,965	$	1,768,717	$	51,407
Distributions to noncontrolling interests in subsidiaries									(60)		(60)
Issuance of common OP units, net			(44)				(44)				(44)
Issuance of restricted OP units	1
Issuance of OP units													9,000
Exercise of OP unit options	18		491				491				491
Amortization of restricted OP units			1,277				1,277				1,277
OP unit compensation expense			479				479				479
Adjustment for Operating Partnership interests of third parties			(9,312)				(9,312)				(9,312)		9,312
Net income			46,891				46,891		39		46,930		474
Other comprehensive income, net					20		20				20
Common OP unit distributions ($0.33 per unit)			(64,092)				(64,092)				(64,092)		(620)
Balance at September 30, 2020	193,748	$	1,737,131	$	(669)	$	1,736,462	$	7,944	$	1,744,406	$	69,573

See accompanying notes to the unaudited consolidated financial statements.

17

CUBESMART, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2021		2020
Operating Activities
Net income	$	184,250	$	124,653
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		166,879		121,075
Non-cash portion of interest expense related to finance leases		208		—
Equity in (earnings) losses of real estate ventures		(1,152)		216
Gains from sales of real estate, net		(28,815)		—
Equity compensation expense		6,067		5,374
Accretion of fair market value adjustment of debt		(1,630)		(530)
Changes in other operating accounts:
Other assets		(7,034)		(6,964)
Accounts payable and accrued expenses		19,397		21,854
Other liabilities		4,770		2,153
Net cash provided by operating activities	$	342,940	$	267,831
Investing Activities
Acquisitions of storage properties		(65,455)		(82,968)
Additions and improvements to storage properties		(27,928)		(41,968)
Development costs		(60,783)		(34,163)
Investment in real estate ventures		(28,256)		(5,914)
Cash distributed from real estate ventures		15,125		4,566
Proceeds from sale of real estate, net		37,348		—
Net cash used in investing activities	$	(129,949)	$	(160,447)
Financing Activities
Proceeds from:
Revolving credit facility		667,658		273,774
Principal payments on:
Revolving credit facility		(785,458)		(236,474)
Mortgage loans and notes payable		(45,791)		(1,898)
Proceeds from issuance of common OP units		199,962		(232)
Cash paid upon vesting of restricted OP units		(843)		(665)
Exercise of OP unit options		7,865		626
Contributions from noncontrolling interests in subsidiaries		8,031		—
Distributions paid to noncontrolling interests in subsidiaries		(138)		(161)
Distributions paid to common OP unitholders		(210,436)		(194,077)
Net cash used in financing activities	$	(159,150)	$	(159,107)
Change in cash, cash equivalents and restricted cash		53,841		(51,723)
Cash, cash equivalents and restricted cash at beginning of period		6,229		58,441
Cash, cash equivalents and restricted cash at end of period	$	60,070	$	6,718
Supplemental Cash Flow and Noncash Information
Cash paid for interest, net of interest capitalized	$	63,610	$	62,937
Supplemental disclosure of noncash activities:
Acquisitions of storage properties	$	—	$	(2,623)
Accretion of put liability	$	7,333	$	4,716
Derivative valuation adjustment	$	60	$	60
Issuance of OP units (see note 4)	$	—	$	9,000
Contributions from noncontrolling interests in subsidiaries	$	3,373	$	—

See accompanying notes to the unaudited consolidated financial statements.

18

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 September 30, 2021, the Company owned (or partially owned and consolidated) self-storage properties located in 24 states throughout the United States and the District of Columbia that are presented under one reportable segment: the Company owns, operates, develops, manages and acquires self-storage properties.

As of September 30, 2021, the Parent Company owned approximately 96.7% 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 one-for-one basis. This one-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, 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, 2020. The results of operations for the three and nine months ended September 30, 2021 and 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.

19

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2020-06 – 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 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 particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted earnings per share computation. The standard is effective on January 1, 2022, with early adoption permitted, but only as of the beginning of an entity’s annual fiscal year. The 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:

	September 30,		December 31,
	2021		2020
	(in thousands)
Land	$	1,114,053	$	1,093,503
Buildings and improvements		4,208,446		4,122,995
Equipment		120,500		123,044
Construction in progress		89,644		108,316
Right-of-use assets - finance leases		41,173		41,896
Storage properties		5,573,816		5,489,754
Less: Accumulated depreciation		(1,047,322)		(983,940)
Storage properties, net	$	4,526,494	$	4,505,814

20

The following table summarizes the Company’s acquisition and disposition activity during the period beginning on January 1, 2020 through September 30, 2021.

			Number of	Purchase / Sale Price
Asset/Portfolio	Metropolitan Statistical Area	Transaction Date	Stores	(in thousands)
2021 Acquisitions:
Minnesota Asset (1)	Minneapolis-St. Paul-Bloomington, MN-WI	April 2021	1	$	12,000
Maryland Asset	Baltimore-Towson, MD	June 2021	1		22,075
New Jersey/Pennsylvania Assets	Philadelphia-Camden-Wilmington, PA-NJ-DE-MD	July 2021	2		33,000
			4	$	67,075
2021 Dispositions:
Colorado/Nevada Assets	Denver-Aurora, CO / Las Vegas-Paradise, NV	September 2021	2	$	16,900
North Carolina Assets	Burlington, NC	September 2021	2		21,700
			4	$	38,600
2020 Acquisitions:
Texas Asset	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
			21	$	735,875
2020 Disposition:
New York Asset	New York-Northern New Jersey-Long Island, NY-NJ-PA	December 2020	1	$	12,750
			1	$	12,750

(1) Acquired by a consolidated joint venture in which the Company holds a 50% interest.

4. INVESTMENT ACTIVITY

2021 Acquisitions

During the nine months ended September 30, 2021, the Company acquired three stores located in Maryland (1), New Jersey (1) and Pennsylvania (1) for an aggregate purchase price of approximately $55.1 million. In addition, a consolidated joint venture in which the Company holds a 50% interest acquired a store in Minnesota for a purchase price of $12.0 million (see note 13). 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 $6.6 million at the time of the acquisitions and prior to amortization of such amounts. The estimated life of these in-place leases is 12 months and the amortization expense that was recognized during the three and nine months ended September 30, 2021 was approximately $1.2 million and $1.3 million, respectively.

As of September 30, 2021, the Company had made aggregate deposits of approximately $0.8 million associated with three stores that were under contract to be acquired for an aggregate acquisition price of $54.5 million. The deposits are reflected in Other assets, net on the Company’s consolidated balance sheets.

2021 Dispositions

During the nine months ended September 30, 2021, the Company sold four properties located in Colorado (1), Nevada (1) and North Carolina (2) for an aggregate sales price of $38.6 million. In conjunction with the sales, the Company recorded gains that totaled $28.8 million.

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Asset Held for Sale

As of September 30, 2021, the Company was under contract to sell a store located in Texas for a sales price of $5.2 million. The assets and liabilities associated with this store have been classified as held for sale within the Company’s September 30, 2021 consolidated balance sheets. As of September 30, 2021, the estimated fair value less selling costs of the store was greater than its carrying value, and therefore no loss has been recorded in the current period.

Tax-Free Like-Kind Exchanges

Certain of the property acquisitions and dispositions detailed above were subject to tax-free like-kind exchanges. As of September 30, 2021, these exchanges were not yet completed and there were $37.3 million in deposits related to these exchanges held by an intermediary. These deposits are classified as restricted cash within the Company’s consolidated balance sheets.

2020 Acquisitions

The Company acquired a portfolio of eight stores located in the outer boroughs of New York City (the “Storage Deluxe Assets”), in two separate tranches during December 2020, for an aggregate purchase price of $540.0 million. In connection with the acquisition of the Storage Deluxe Assets, the Company assumed six 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 $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 and nine months ended September 30, 2021 was approximately $12.1 million and $36.4 million, respectively. Additionally, as part of the transaction, the Company assumed three existing ground leases as lessee, two of which have been classified as finance leases and one of which has been classified as an operating lease (see note 14).

The Company also acquired 13 additional stores located in Florida (5), Maryland (1), Nevada (1), New Jersey (1), New York (1), Texas (3) and Virginia (1) for an aggregate purchase price of approximately $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 $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 and nine months ended September 30, 2021 was approximately $2.2 million and $7.4 million, respectively. The amortization expense that was recognized during the three and nine months ended September 30, 2020 was $0.6 million and $1.1 million, 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.

2020 Disposition

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

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Development Activity

As of September 30, 2021, the Company had investments in joint ventures to develop three self-storage properties located in Massachusetts, New York and Virginia. Construction for all projects is expected to be completed by the second quarter of 2022 (see note 13). As of September 30, 2021, development costs incurred to date for these projects totaled $56.5 million. Total construction costs for these projects are expected to be $75.0 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, 2020 through September 30, 2021. The costs associated with the construction of these stores are capitalized to land, building and improvements, as well as equipment and are reflected in Storage properties on the Company’s consolidated balance sheets.

			CubeSmart
	Number of		Ownership	Total
Store Location	Stores	Date Opened	Interest	Construction Costs
				(in thousands)
East Meadow, NY (1)	1	Q2 2021	100%	$	25,900
King of Prussia, PA	1	Q2 2021	70%		22,800
Arlington, VA (2)	1	Q1 2021	90%		26,400
Brooklyn, NY (3)	1	Q2 2020	100%		45,900
	4			$	121,000

(1) This store was previously owned by a consolidated joint venture, in which the Company held a 51% ownership interest. On June 29, 2021, the noncontrolling member in the venture that owned the store put its 49% interest in the venture to the Company for $6.6 million in cash consideration.

(2) This 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 (see note 13).

(3) This store was previously owned by a consolidated joint venture, in which the Company held a 51% ownership interest. On September 29, 2020, the noncontrolling member in the venture that owned the store put its 49% interest in the venture to the Company for $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 remainder of the purchase price (see note 13).  

5. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES

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

	CubeSmart	Number of Stores as of		Carrying Value of Investment as of
	Ownership	September 30,	December 31,	September 30,		December 31,
Unconsolidated Real Estate Ventures	Interest	2021	2020	2021		2020
191 V CUBE LLC ("HVP V") (1)	20%	4	-	$	22,396	$	-
191 IV CUBE Southeast LLC ("HVPSE") (2)	10%	14	14		4,956		5,015
191 IV CUBE LLC ("HVP IV") (3)	20%	28	21		24,893		21,760
CUBE HHF Northeast Venture LLC ("HHFNE") (4)	10%	13	13		1,367		1,628
CUBE HHF Limited Partnership ("HHF") (5)	50%	35	35		57,742		63,668
		94	83	$	111,354	$	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. As of September 30, 2021, HVP V owned four self-

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storage properties located in Florida (2) and New Jersey (2). HVP V paid an aggregate of $110.7 million for these properties, of which $2.2 million was allocated to the value of the in-place leases. These acquisitions were funded initially through pro-rata contributions by the Company and its unaffiliated joint venture partner. The Company’s total contribution to HVP V related to these acquisitions was $22.5 million. On September 30, 2021, the venture closed on a $60.0 million secured term loan. The loan bears interest at SOFR plus 2.05% and matures on September 30, 2025 with an option to extend the maturity date through September 30, 2026, subject to satisfaction of certain conditions and payment of the extension fees as stipulated in the loan agreement.

(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 leases. 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.

(3) The stores owned by HVP IV are located in Arizona (2), Connecticut (3), Florida (4), Georgia (2), Illinois (5), Maryland (2), Minnesota (1), Pennsylvania (1) and Texas (8). The Company’s total contribution to HVP IV in connection with these store acquisitions was $32.0 million. During the nine months ended September 30, 2021, HVP IV entered into a new $221.6 million secured loan, which bears interest at LIBOR plus 1.95% per annum, and matures on April 19, 2025. HVP IV used the proceeds from this loan to repay its existing loans (totaling $137.7 million) in full.

(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 September 30, 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.

(5) The stores owned by HHF are located in North Carolina (1) and Texas (34). On January 21, 2021, HHF entered into a new $105.0 million secured loan, which bears interest at a fixed rate of 2.58% per annum and matures on February 5, 2028. HHF used the proceeds from this loan to repay its existing outstanding $100.0 million loan in full. Subsequent to September 30, 2021, HHF sold seven stores in Texas for an aggregate sales price of approximately $85.0 million.

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. 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.

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The following is a summary of the financial position of the Ventures as of September 30, 2021 and December 31, 2020.

	September 30,		December 31,
	2021		2020
Assets	(in thousands)
Storage properties, net	$	853,182	$	662,833
Other assets		94,624		18,112
Total assets	$	947,806	$	680,945
Liabilities and equity
Debt	$	507,001	$	359,985
Other liabilities		18,834		11,588
Equity
CubeSmart		111,354		92,071
Joint venture partners		310,617		217,301
Total liabilities and equity	$	947,806	$	680,945

The following is a summary of results of operations of the Ventures for the three and nine months ended September 30, 2021 and 2020.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(in thousands)
Total revenues	$	24,273	$	17,622	$	64,337	$	49,024
Operating expenses		(10,368)		(8,424)		(28,464)		(23,344)
Other expenses		(138)		(100)		(988)		(334)
Interest expense, net		(2,714)		(2,934)		(8,922)		(8,638)
Depreciation and amortization		(9,719)		(8,823)		(27,439)		(24,346)
Net income (loss)	$	1,334	$	(2,659)	$	(1,476)	$	(7,638)
Company’s share of net income (loss)	$	816	$	(37)	$	1,152	$	(216)

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6. OTHER ASSETS

Other assets are comprised of the following as of September 30, 2021 and December 31, 2020:

	September 30,		December 31,
	2021		2020
	(in thousands)
Intangible assets, net of accumulated amortization of $44,748 and $2,123	$	19,258	$	57,820
Accounts receivable, net		6,812		5,829
Prepaid property taxes		7,245		6,334
Prepaid property and casualty insurance		4,081		2,626
Amounts due from affiliates (see note 16)		14,289		13,130
Assets held in trust related to deferred compensation arrangements		21,309		17,207
Right-of-use assets - operating leases (see note 14)		54,385		55,302
Equity investment recorded at cost (1)		—		5,000
Other		6,990		7,505
Total other assets, net	$	134,369	$	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 earned an 11% cumulative dividend prior to any other distributions. On August 24, 2021, the Class A preferred units and all accrued and unpaid dividends were redeemed and paid, respectively. Prior to this redemption, the Company’s investment in Capital Storage and the related dividends were 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.

7. UNSECURED SENIOR NOTES

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

	September 30,		December 31,		Effective		Issuance	Maturity
Unsecured Senior Notes	2021		2020		Interest Rate		Date	Date
	(in thousands)
$300M 4.375% Guaranteed Notes due 2023 (1)	$	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
$300M 3.125% Guaranteed Notes due 2026		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
$350M 3.000% Guaranteed Notes due 2030		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		2,050,000		2,050,000
Less: Discount on issuance of unsecured senior notes, net		(6,894)		(7,470)
Less: Loan procurement costs, net		(10,853)		(12,158)
Total unsecured senior notes, net	$	2,032,253	$	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

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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 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 September 30, 2021, the Operating Partnership was in compliance with all of the financial covenants under the Senior Notes.

8. REVOLVING CREDIT FACILITY

On December 9, 2011, the Company entered into a credit agreement (the “Credit Facility”). 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 a rate of 1.10% over LIBOR, inclusive of a facility fee of 0.15%.

As of September 30, 2021, borrowings under the Revolver had an effective interest rate of 1.18%. Additionally, as of September 30, 2021, $749.4 million was available for borrowing under the Revolver. The available balance under the Revolver is reduced by an outstanding letter of credit of $0.6 million.

Under the 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 September 30, 2021, the Company was in compliance with all of its financial covenants.

9. MORTGAGE LOANS AND NOTES PAYABLE

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

	Carrying Value as of
	September 30,		December 31,		Effective		Maturity
Mortgage Loans and Notes Payable	2021		2020		Interest Rate		Date
	(in thousands)
Bronx IX, NY (1)	$	—	$	21,030	4.85	%	Jun-21
Bronx X, NY (1)		—		23,148	4.64	%	Jun-21
Nashville V, TN		2,220		2,261	3.85	%	Jun-23
New York, NY		29,503		29,981	3.51	%	Jun-23
Annapolis I, MD		5,146		5,283	3.78	%	May-24
Brooklyn XV, NY		15,504		15,713	2.15	%	May-24
Long Island City IV, NY		12,655		12,852	2.15	%	May-24
Long Island City II, NY		18,819		19,094	2.25	%	Jul-26
Long Island City III, NY		18,830		19,106	2.25	%	Aug-26
Flushing II, NY		54,300		54,300	2.15	%	Jul-29
Principal balance outstanding		156,977		202,768
Plus: Unamortized fair value adjustment		13,674		15,879
Less: Loan procurement costs, net		(1,796)		(2,143)
Total mortgage loans and notes payable, net	$	168,855	$	216,504

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

As of September 30, 2021 and December 31, 2020, the Company’s mortgage loans payable were secured by certain of its self-storage properties with net book values of approximately $452.8 million and $539.2 million, respectively. The following table represents the future principal payment requirements on the outstanding mortgage loans and notes payable as of September 30, 2021 (in thousands):

2021	$	591
2022		2,426
2023		32,591
2024		32,329
2025		979
2026 and thereafter		88,061
Total mortgage payments		156,977
Plus: Unamortized fair value adjustment		13,674
Less: Loan procurement costs, net		(1,796)
Total mortgage loans and notes payable, net	$	168,855

10. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table summarizes the changes in accumulated other comprehensive loss by component for the nine months ended September 30, 2021.

	September 30,
	2021
		(in thousands)
Beginning balance	$	(656)
Reclassification of realized losses on interest rate swaps (1)		60
Ending balance		(596)
Less: portion included in noncontrolling interests in the Operating Partnership		21
Total accumulated other comprehensive loss included in equity	$	(575)

(1) See note 11 for additional information about the effects of the amounts reclassified.

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 September 30, 2021 and December 31, 2020, all derivative instruments entered into by the Company had been settled.

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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 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 its 4.375% senior notes due 2029 (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 twenty thousand dollars and sixty thousand dollars of unrealized losses from accumulated other comprehensive loss as an increase to interest expense during the three and nine months ended September 30, 2021, respectively. The Company estimates that $0.1 million will be reclassified as an increase to interest expense in the next 12 months.

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 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 no financial assets or liabilities carried at fair value as of September 30, 2021 or December 31, 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 September 30, 2021 and December 31, 2020.

The following table summarizes the carrying value and estimated fair value of the Company’s debt as of September 30, 2021 and December 31, 2020:

	September 30, 2021		December 31, 2020
		(in thousands)
Carrying value	$	2,201,108	$	2,364,676
Fair value		2,336,173		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 September 30, 2021 and December 31, 2020. The Company estimates the fair value of its fixed-rate debt and the credit spreads over variable market rates on its 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

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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.

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 following table summarizes the Company’s consolidated joint ventures, each of which are accounted for as VIEs (dollars in thousands):

				CubeSmart
	Number		Date Opened /	Ownership	September 30, 2021
Consolidated Joint Ventures	of Stores	Location	Acquired (1)	Interest	Total Assets		Total Liabilities
					(in thousands)
CS Vienna, LLC ("Vienna") (2)	1	Vienna, VA	Q2 2022 (est.)	72%	$	23,159	$	11,976
CS 750 W Merrick Rd, LLC ("Merrick") (3)	1	Valley Stream, NY	Q1 2022 (est.)	51%		24,683		13,613
CS SDP Newtonville, LLC ("Newton") (4)	1	Newton, MA	Q4 2021 (est.)	90%		19,413		12,898
CS Valley Forge Village Storage, LLC ("VFV") (4)	1	King of Prussia, PA	Q2 2021	70%		21,373		13,887
CS Lock Up Anoka, LLC ("Anoka") (5)	1	Anoka, MN	Q2 2021	50%		12,054		5,620
SH3, LLC ("SH3") (6)	1	Arlington, VA	Q2 2015/Q1 2021	90%		39,311		197
Astoria Investors, LLC ("Astoria") (7)	1	Queens, NY	TBD	70%		21,000		4
	7				$	160,993	$	58,195

(1) Anoka was formed to acquire an existing store that had commenced operations, while all other consolidated joint ventures were formed to develop, own and operate new stores.

(2) 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 commitment to Vienna to fund all or a portion of the construction costs. As of September 30, 2021, the Company has funded $10.2 million of a total $17.0 million loan commitment to Vienna, which is included in the total liabilities amount within the table above. This loan and the related interest were eliminated for consolidation purposes.

(3) The noncontrolling member of Merrick has the option to put their ownership interest in the venture to the Company for $17.1 million (the “Put Option”) within the two-year period after construction of the store is substantially 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 member for $17.1 million, beginning twelve months after the end of the 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. The Company is accreting this liability during the development period and, as of September 30, 2021, has accrued $12.2 million. This amount is included in Accounts payable, accrued expenses and other liabilities on the Company’s consolidated balance sheets.

(4) The Company has related party loan commitments to VFV and Newton to fund a portion of the construction costs. As of September 30, 2021, the Company has outstanding loans of $13.1 million to VFV and $12.4 million 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.

(5) On April 16, 2021, the Company contributed $3.4 million in exchange for a 50% ownership interest in Anoka, which acquired a self-storage property located in Minnesota for $12.0 million. In addition, as of September 30, 2021, the Company has funded $5.6 million of a $6.1 million related party loan commitment to Anoka, which is included in the total liability amount within the table above. This loan and the related interest were eliminated for consolidation purposes.

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(6) SH3 owns two 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.

(7) On August 17, 2021, the Company contributed $14.7 million in exchange for a 70% ownership interest in Astoria, which acquired land for future development of a self-storage property in Queens, NY for $20.0 million.

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 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 3.3% and 3.6% of the outstanding OP Units, as of September 30, 2021 and December 31, 2020, respectively, 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.

In two separate tranches during December 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 New York for $10.0 million. In conjunction with the closing, the Company paid $1.0 million in cash and issued 276,497 OP Units, valued at approximately $9.0 million, to pay the remaining consideration.

As of September 30, 2021 and December 31, 2020, 7,008,397 and 7,420,828 OP units, respectively, were held by third parties. The per unit cash redemption amount of the outstanding OP units was calculated based upon the closing price of the common shares of CubeSmart on the New York Stock Exchange on the final trading 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 September 30, 2021 and December 31, 2020. At September 30, 2021 and December 31, 2020, the Operating Partnership

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recorded an increase in the value of OP Units owned by third parties and a corresponding decrease to capital of $14.8 million and $4.2 million, respectively.

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 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 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 the three and nine months ended September 30, 2021, administrative and late fees totaled $5.6 million and $15.4 million, respectively. For the three and nine months ended September 30, 2020, administrative and late fees totaled $5.1 million and $15.0 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 of up to 44 years. Certain of the Company’s leases (1) provide for one or more options to renew, with renewal options that can extend the lease 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. Lease expense for payments related to the Company’s finance leases is recognized as interest expense using the interest method over the related lease 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.

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For the three and nine months ended September 30, 2021 and 2020, the Company’s lease costs consist of the following components:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(in thousands)
Finance lease cost:
Amortization of finance lease right-of-use assets	$	241	$	—	$	723	$	—
Interest expense related to finance lease liabilities		540		—		1,599		—
Operating lease cost		819		674		2,463		2,167
Short-term lease cost (1)		258		298		890		881
Total lease costs	$	1,858	$	972	$	5,675	$	3,048
Cash paid for amounts included in measurement of lease liabilities:
Operating cash outflows for finance leases	$	531	$	—	$	1,392	$	—
Operating cash outflows for operating leases		632		524		1,885		1,666
Total cash outflows for lease liability measurement	$	1,163	$	524	$	3,277	$	1,666

(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.

The following table represents supplemental balance sheet information related to leases as of September 30, 2021 and December 31, 2020.

	September 30,			December 31,
	2021			2020
	(dollars in thousands)
Finance Leases
Right-of-use assets included in Storage properties, net	$	41,173		$	41,896
Lease liabilities included in Lease liabilities - finance leases	$	65,807		$	65,599
Operating Leases
Right-of-use assets included in Other assets, net	$	54,385		$	55,302
Lease liabilities included in Accounts payable, accrued expenses and other liabilities	$	53,420		$	53,595
Weighted Average Lease Term (in years)
Finance leases		42.8			43.5
Operating leases		34.2			34.8
Weighted Average Discount Rate
Finance leases		3.25	%		3.25	%
Operating leases		4.47	%		4.46	%

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The following table represents the future lease liability maturities as of September 30, 2021 (in thousands):

	Finance		Operating
2021	$	545	$	626
2022		2,183		2,639
2023		2,183		2,690
2024		2,183		2,540
2025		2,224		2,539
2026 and thereafter		122,932		99,290
Total lease payments		132,250		110,324
Less: Imputed interest		(66,443)		(56,904)
Present value of lease liabilities	$	65,807	$	53,420

During the three and nine months ended September 30, 2021 and 2020, the Company did not enter into any lease agreements set to commence in the future.

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

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 and nine months ended September 30, 2021 totaled $1.3 million and $3.6 million, respectively, compared to $1.0 million and $2.8 million, respectively, for the same periods in 2020.

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 $14.3 million and $13.1 million as of September 30, 2021 and December 31, 2020, respectively, and are reflected in Other assets, net on the Company’s consolidated balance sheets. Additionally, as discussed in note 13, the Company had outstanding mortgage loans receivable from consolidated joint ventures of $41.3 million and $21.4 million as of September 30, 2021 and December 31, 2020, respectively, which are eliminated for consolidation purposes. The Company believes that all of these related-party receivables are fully collectible.

The HVP V, HVPSE, HVP IV and HHFNE operating agreements provide for acquisition, disposition and other fees payable from HVP V, HVPSE, HVP IV and HHFNE to the Company upon the closing of a property transaction by HVP 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 and nine months ended September 30, 2021, the Company recognized fees associated with property transactions of $0.4 million and $1.1 million, respectively. During the nine months ended September 30, 2020, the Company recognized $0.7 million in fees associated with property transactions. There were no property transaction fees recognized during the three months ended September 30, 2020. Property transaction fees are included in Other income on the consolidated statements of operations.

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17. EARNINGS PER SHARE AND UNIT AND SHAREHOLDERS’ EQUITY AND CAPITAL

Earnings per common share and shareholders’ equity

The following is a summary of the elements used in calculating basic and diluted earnings per common share:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(dollars and units in thousands, except per share amounts)
Net income	$	90,569	$	47,404	$	184,250	$	124,653
Noncontrolling interests in the Operating Partnership		(3,149)		(474)		(6,466)		(1,246)
Noncontrolling interest in subsidiaries		230		(39)		350		(115)
Net income attributable to the Company’s common shareholders	$	87,650	$	46,891	$	178,134	$	123,292
Weighted average basic shares outstanding		202,194		193,745		200,934		193,652
Share options and restricted share units		1,603		794		1,357		734
Weighted average diluted shares outstanding (1)		203,797		194,539		202,291		194,386
Basic earnings per share attributable to common shareholders	$	0.43	$	0.24	$	0.89	$	0.64
Diluted earnings per share attributable to common shareholders (2)	$	0.43	$	0.24	$	0.88	$	0.63

Earnings per common unit and capital

The following is a summary of the elements used in calculating basic and diluted earnings per common unit:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(dollars and units in thousands, except per unit amounts)
Net income	$	90,569	$	47,404	$	184,250	$	124,653
Operating Partnership interests of third parties		(3,149)		(474)		(6,466)		(1,246)
Noncontrolling interest in subsidiaries		230		(39)		350		(115)
Net income attributable to common unitholders	$	87,650	$	46,891	$	178,134	$	123,292
Weighted average basic units outstanding		202,194		193,745		200,934		193,652
Unit options and restricted share units		1,603		794		1,357		734
Weighted average diluted units outstanding (1)		203,797		194,539		202,291		194,386
Basic earnings per unit attributable to common unitholders	$	0.43	$	0.24	$	0.89	$	0.64
Diluted earnings per unit attributable to common unitholders (2)	$	0.43	$	0.24	$	0.88	$	0.63

(1) For the three and nine months ended September 30, 2021, the Company declared cash dividends per common share/unit of $0.34 and $1.02, respectively. For the three and nine months ended September 30, 2020, the Company declared cash dividends per common share/unit of and $0.33 and $0.99, respectively.

(2) The amount of anti-dilutive options that were excluded from the computation of diluted earnings per share/unit as the exercise price was higher than the average share price of the Company for both the three and nine months ended September 30, 2020 was 0.8 million. There were no anti-dilutive options for the three and nine months ended September 30, 2021.

The OP units and common units have essentially the same economic characteristics as they share equally in the total net income or loss and distributions of the Operating Partnership. An Operating Partnership unit may be redeemed for

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cash, or, at the Company’s option, common units on a one-for-one basis. Outstanding noncontrolling interest units in the Operating Partnership were 7,008,397 and 2,148,805 as of September 30, 2021 and 2020, respectively. There were 203,284,756 and 193,748,023 common units outstanding as of September 30, 2021 and 2020, respectively.

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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.” 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, 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 September 30, 2021 and December 31, 2020, we owned (or partially owned and consolidated) 545 and 543 self-storage properties, respectively. These properties totaled approximately 39.0 million and 38.5 million rentable square feet, respectively, as of such dates. As of September 30, 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 September 30, 2021, we managed 706 stores for third parties (including 94 stores containing an aggregate of approximately 6.8 million rentable square feet as part of five separate unconsolidated real estate ventures) bringing the total number of stores which we owned and/or managed to 1,251. As of September 30, 2021, we managed stores for third parties in the following 37 states: Alabama, Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, 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 New York, Florida, Texas and California provided approximately 19%, 15%, 9% and 8%, respectively, of total revenues for the nine months ended September 30, 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 unaudited consolidated financial statements are particularly important for an understanding of the financial position and results of operations presented in this Report. A summary of significant accounting policies is also provided in the aforementioned notes to our unaudited consolidated financial statements (see note 2). 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. The Company may also consider additional factors included in the authoritative guidance, such as whether or not it is the partner in the VIE that is most closely associated with the VIE. When an entity is not deemed to be a VIE, the Company considers the provisions of additional FASB guidance to determine whether a general partner, or the general partners as a group, controls a limited partnership or similar entity when the limited partners have certain rights. The Company consolidates (i) entities that are VIEs and of which the Company is deemed to be the primary beneficiary and (ii) entities that are non-VIEs which the Company controls and in which the limited partners do not have substantive participating rights, or the ability to dissolve the entity or remove the Company without cause nor substantive participating rights.

Self-Storage Properties

The Company records self-storage properties at cost less accumulated depreciation. Depreciation on 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 is allocated to the tangible and intangible assets acquired and liabilities assumed based on estimated fair values. Allocations to land, building and improvements and equipment are recorded based upon their respective fair values as estimated by management. If appropriate, the Company allocates a portion of the purchase price to an intangible asset attributed to the value of in-place leases. This intangible asset is generally amortized to expense over the expected remaining term of the respective leases. Substantially all of the storage leases in place at acquired stores are at market rates, as the majority of the leases are month-to-month contracts. Accordingly, to date, no portion of the purchase price has been allocated to above- or below-market lease intangibles associated with storage leases assumed at acquisition. Above- or below- market lease intangibles associated with assumed 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 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 and nine months ended September 30, 2021 and 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 was one store classified as held for sale as of September 30, 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 appraisals. There were no impairment losses related to the Company’s investments in unconsolidated real estate ventures recognized during the three months ended

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements affecting our business, see note 2 to the unaudited 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 September 30, 2021, we owned 507 same-store properties and 38 non-same-store properties. For analytical presentation, all percentages are calculated using the numbers presented in the financial statements contained in this Report.

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. The following table summarizes the change in number of owned stores from January 1, 2020 through September 30, 2021:

	2021	2020
Balance - January 1	543	523
Stores acquired	—	1
Stores developed	1	—
Stores combined (1)	(1)	—
Balance - March 31	543	524
Stores acquired (2)	2	2
Stores developed	2	1
Balance - June 30	547	527
Stores acquired	2	—
Stores sold	(4)	—
Balance - September 30	545	527
Stores acquired		18
Stores combined (3)		(1)
Stores sold		(1)
Balance - December 31		543

(1) On 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) For the quarter ended June 30, 2021, includes one store acquired by a consolidated joint venture in which the Company holds a 50% interest.

(3) On November 10, 2020, the Company acquired a store located in Merritt Island, FL for approximately $3.9 million. The acquired store is located 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.

Impact of COVID-19 on the Consolidated Financial Statements and Business Operations

Our assessment of the impact of COVID-19 on the consolidated financial statements and business operations has not changed materially from the description provided in Part I. Item 1. “Business,” of our Annual Report on Form 10-K for the year ended December 31, 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 response to the pandemic; and the continued impact on economic activity from the pandemic may, individually or in aggregate, impact our future business, financial condition, results of operations, access to capital and share price.

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Comparison of the three months ended September 30, 2021 to the three months ended September 30, 2020 (in thousands)

											Non Same-Store						Other/
	Same-Store Property Portfolio										Properties						Eliminations				Total Portfolio
									%																				%
	2021			2020			Change		Change		2021			2020			2021		2020		2021			2020			Change		Change
REVENUES:
Rental income	$	163,321		$	140,558		$	22,763	16.2	%	$	19,088		$	5,949		$	—	$	—	$	182,409		$	146,507		$	35,902	24.5	%
Other property related income (1)		7,048			6,862			186	2.7	%		758			382			14,086		11,672		21,892			18,916			2,976	15.7	%
Property management fee income		—			—			—	0.0	%		—			—			8,263		7,088		8,263			7,088			1,175	16.6	%
Total revenues		170,369			147,420			22,949	15.6	%		19,846			6,331			22,349		18,760		212,564			172,511			40,053	23.2	%
OPERATING EXPENSES:
Property operating expenses (2)		49,172			47,336			1,836	3.9	%		5,703			2,350			9,190		7,415		64,065			57,101			6,964	12.2	%
NET OPERATING INCOME:		121,197			100,084			21,113	21.1	%		14,143			3,981			13,159		11,345		148,499			115,410			33,089	28.7	%
Store count		507			507							38			20							545			527
Total square footage		35,485			35,485							3,485			1,604							38,970			37,089
Period end occupancy		94.8	%		94.1	%						80.1	%		73.3	%						93.4	%		93.2	%
Period average occupancy		95.6	%		94.1	%
Realized annual rent per occupied sq. ft. (3)	$	19.26		$	16.83
Depreciation and amortization																						55,871			38,084			17,787	46.7	%
General and administrative																						12,095			10,193			1,902	18.7	%
Subtotal																						67,966			48,277			19,689	40.8	%
OTHER (EXPENSE) INCOME
Interest:
Interest expense on loans																						(19,122)			(18,984)			(138)	(0.7)	%
Loan procurement amortization expense																						(1,012)			(753)			(259)	(34.4)	%
Equity in earnings (losses) of real estate ventures																						816			(37)			853	2,305.4	%
Gains from sales of real estate, net																						28,815			—			28,815	100.0	%
Other																						539			45			494	1,097.8	%
Total other income (expense)																						10,036			(19,729)			29,765	150.9	%
NET INCOME																						90,569			47,404			43,165	91.1	%
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
Noncontrolling interests in the Operating Partnership																						(3,149)			(474)			(2,675)	(564.3)	%
Noncontrolling interests in subsidiaries																						230			(39)			269	689.7	%
NET INCOME ATTRIBUTABLE TO THE COMPANY’S COMMON SHAREHOLDERS																					$	87,650		$	46,891		$	40,759	86.9	%

(1) Protection plan revenue, which prior to 2021 had 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) For comparability purposes, current year amounts related to the expiration of certain real estate tax abatements have been excluded from the same-store portfolio results ($88k for the three months ended September 30, 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 $146.5 million during the three months ended September 30, 2020 to $182.4 million for the three months ended September 30, 2021, an increase of $35.9 million, or 24.5%. The $22.8 million increase in same-store rental income was primarily due to higher rental rates and occupancy. Realized annual rent per occupied square foot in our same-store portfolio increased 14.4% as a result of higher rental rates for new and existing customers for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020. The remaining increase in revenues was primarily attributable to $13.1 million of additional rental income from the stores acquired or opened in 2020 and 2021 included in our non-same-store portfolio.

Other property related income increased from $18.9 million during the three months ended September 30, 2020 to $21.9 million for the three months ended September 30, 2021, an increase of $3.0 million, or 15.7%. The increase was primarily due to a $1.3 million increase in customer storage protection plan participation at our owned and managed stores.

Property management fee income increased from $7.1 million during the three months ended September 30, 2020 to $8.3 million for the three months ended September 30, 2021, an increase of $1.2 million, or 16.6%. This increase was primarily due to an increase in rental income at our managed stores for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020.

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Operating Expenses

Property operating expenses increased from $57.1 million during the three months ended September 30, 2020 to $64.1 million for the three months ended September 30, 2021, an increase of $7.0 million, or 12.2%. The $1.8 million increase in property operating expenses on the same-store portfolio was primarily due to a $1.1 million increase in advertising and a $1.0 million increase in property taxes. The remainder of the increase was primarily attributable to $3.4 million of increased expenses associated with newly acquired or developed stores.

Depreciation and amortization increased from $38.1 million during the three months ended September 30, 2020 to $55.9 million for the three months ended September 30, 2021, an increase of $17.8 million, or 46.7%. This increase was primarily attributable to depreciation and amortization associated with newly acquired or developed stores.

General and administrative expenses increased from $10.2 million during the three months ended September 30, 2020 to $12.1 million for the three months ended September 30, 2021, an increase of $1.9 million, or 18.7%. This increase was primarily attributable to increased personnel expenses resulting in part from additional employee headcount to support our growth.

Other (Expense) Income

Interest expense on loans increased from $19.0 million during the three months ended September 30, 2020 to $19.1 million for the three months ended September 30, 2021, an increase of $0.1 million, or 0.7%. The increase was attributable to a higher amount of outstanding debt partially offset by lower interest rates during the three months ended September 30, 2021. To fund a portion of the Company’s growth, the average outstanding debt balance increased $256.8 million to $2.26 billion during the three months ended September 30, 2021 as compared to $2.00 billion during the three months ended September 30, 2020. The weighted average effective interest rate on the Company’s outstanding debt for the three months ended September 30, 2021 and 2020 was 3.40% and 3.89%, respectively.

Gains from sales of real estate, net were $28.8 million for the three months ended September 30, 2021. There were no such gains for the three months ended September 30, 2020. These gains are determined on a transactional basis and, accordingly, are not comparable across reporting periods.

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Comparison of the nine months ended September 30, 2021 to the nine months ended September 30, 2020 (in thousands)

											Non Same-Store						Other/
	Same-Store Property Portfolio										Properties						Eliminations				Total Portfolio
									%																				%
	2021			2020			Change		Change		2021			2020			2021		2020		2021			2020			Change		Change
REVENUES:
Rental income	$	463,515		$	412,737		$	50,778	12.3	%	$	51,729		$	15,239		$	—	$	—	$	515,244		$	427,976		$	87,268	20.4	%
Other property related income (1)		19,873			18,467			1,406	7.6	%		2,013			872			40,528		33,001		62,414			52,340			10,074	19.2	%
Property management fee income		—			—			—	0.0	%		—			—			22,994		20,074		22,994			20,074			2,920	14.5	%
Total revenues		483,388			431,204			52,184	12.1	%		53,742			16,111			63,522		53,075		600,652			500,390			100,262	20.0	%
OPERATING EXPENSES:
Property operating expenses (2)		145,915			140,121			5,794	4.1	%		16,160			6,501			26,969		21,564		189,044			168,186			20,858	12.4	%
NET OPERATING INCOME:		337,473			291,083			46,390	15.9	%		37,582			9,610			36,553		31,511		411,608			332,204			79,404	23.9	%
Store count		507			507							38			20							545			527
Total square footage		35,485			35,485							3,485			1,604							38,970			37,089
Period end occupancy		94.8	%		94.1	%						80.1	%		73.3	%						93.4	%		93.2	%
Period average occupancy		95.0	%		92.6	%
Realized annual rent per occupied sq. ft. (3)	$	18.33		$	16.75
Depreciation and amortization																						163,820			118,815			45,005	37.9	%
General and administrative																						34,571			30,101			4,470	14.9	%
Subtotal																						198,391			148,916			49,475	33.2	%
OTHER (EXPENSE) INCOME
Interest:
Interest expense on loans																						(57,468)			(56,367)			(1,101)	(2.0)	%
Loan procurement amortization expense																						(3,059)			(2,260)			(799)	(35.4)	%
Equity in earnings (losses) of real estate ventures																						1,152			(216)			1,368	633.3	%
Gains from sales of real estate, net																						28,815			—			28,815	100.0	%
Other																						1,593			208			1,385	665.9	%
Total other expense																						(28,967)			(58,635)			29,668	50.6	%
NET INCOME																						184,250			124,653			59,597	47.8	%
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
Noncontrolling interests in the Operating Partnership																						(6,466)			(1,246)			(5,220)	(418.9)	%
Noncontrolling interests in subsidiaries																						350			(115)			465	404.3	%
NET INCOME ATTRIBUTABLE TO THE COMPANY’S COMMON SHAREHOLDERS																					$	178,134		$	123,292		$	54,842	44.5	%

(1) Protection plan revenue, which prior to 2021 had 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) For comparability purposes, current year amounts related to the expiration of certain real estate tax abatements have been excluded from the same-store portfolio results ($208k for the nine months ended September 30, 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 $428.0 million during the nine months ended September 30, 2020 to $515.2 million for the nine months ended September 30, 2021, an increase of $87.3 million, or 20.4%. The $50.8 million increase in same-store rental income was primarily due to higher rental rates and occupancy. Realized annual rent per occupied square foot in our same-store portfolio increased 9.4% as a result of higher rental rates for new and existing customers for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. The remaining increase in revenues was primarily attributable to $36.5 million of additional rental income from the stores acquired or opened in 2020 and 2021 included in our non-same-store portfolio.

Other property related income increased from $52.3 million during the nine months ended September 30, 2020 to $62.4 million for the nine months ended September 30, 2021, an increase of $10.1 million, or 19.2%. The $1.4 million increase in same-store other property related income was mainly attributable to increases in fee revenue and merchandise sales. The increase was also due to a $4.8 million increase in customer storage protection plan participation at our owned and managed stores.

Property management fee income increased from $20.1 million during the nine months ended September 30, 2020 to $23.0 million for the nine months ended September 30, 2021, an increase of $2.9 million, or 14.5%. This increase was primarily due to an increase in rental income at our managed stores for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.

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Operating Expenses

Property operating expenses increased from $168.2 million during the nine months ended September 30, 2020 to $189.0 million for the nine months ended September 30, 2021, an increase of $20.9 million, or 12.4%. The $5.8 million increase in property operating expenses in the same-store portfolio was primarily due to a $2.4 million increase in property taxes and a $2.3 million increase in advertising. The remainder of the increase was primarily attributable to $9.7 million of increased expenses associated with newly acquired or developed stores.

Depreciation and amortization increased from $118.8 million during the nine months ended September 30, 2020 to $163.8 million for the nine months ended September 30, 2021, an increase of $45.0 million, or 37.9%. This increase was primarily attributable to depreciation and amortization associated with newly acquired or developed stores.

General and administrative expenses increased from $30.1 million during the nine months ended September 30, 2020 to $34.6 million for the nine months ended September 30, 2021, an increase of $4.5 million, or 14.9%. This increase was primarily attributable to increased personnel expenses resulting in part from additional employee headcount to support our growth.

Other (Expense) Income

Interest expense on loans increased from $56.4 million during the nine months ended September 30, 2020 to $57.5 million for the nine months ended September 30, 2021, an increase of $1.1 million, or 2.0%. The increase was attributable to a higher amount of outstanding debt partially offset by lower interest rates during the nine months ended September 30, 2021. To fund a portion of the Company’s growth, the average outstanding debt balance increased $301.3 million to $2.28 billion during the nine months ended September 30, 2021 as compared to $1.98 billion during the nine months ended September 30, 2020. The weighted average effective interest rate on the Company’s outstanding debt for the nine months ended September 30, 2021 and 2020 was 3.40% and 3.92%, respectively.

Gains from sales of real estate, net were $28.8 million for the nine months ended September 30, 2021. There were no such gains for the nine months ended September 30, 2020. These gains are determined on a transactional basis and, accordingly, are not comparable across reporting periods.

Cash Flows

Comparison of the nine months ended September 30, 2021 to the nine months ended September 30, 2020

A comparison of cash flow from operating, investing and financing activities for the nine months ended September 30, 2021 and 2020 is as follows:

	Nine Months Ended September 30,
Net cash provided by (used in):	2021		2020		Change
	(in thousands)
Operating activities	$	342,940	$	267,831	$	75,109
Investing activities	$	(129,949)	$	(160,447)	$	30,498
Financing activities	$	(159,150)	$	(159,107)	$	(43)

Cash provided by operating activities increased from $267.8 million for the nine months ended September 30, 2020 to $342.9 million for the nine months ended September 30, 2021, reflecting an increase of $75.1 million. Our increased cash flow from operating activities was primarily attributable to stores acquired and developed during 2020 and 2021 and increased net operating income levels in the same-store portfolio in the 2021 period as compared to the corresponding 2020 period.

Cash used in investing activities decreased from $160.4 million for the nine months ended September 30, 2020 to $129.9 million for the nine months ended September 30, 2021, reflecting a decrease of $30.5 million. The change was primarily driven by an increase in net proceeds received from sale of real estate. In conjunction with the sale of four

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stores during the nine months ended September 30, 2021, we received aggregate net proceeds of $37.3 million, with no comparable cash inflows during the corresponding 2020 period.

Cash used in financing activities was $159.1 million for the nine months ended September 30, 2020 compared to $159.2 million for the nine months ended September 30, 2021. This change was primarily the result of a $155.1 million increase in net revolving credit facility payments during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. Additionally, principal payments on mortgage loans increased $43.9 million from the nine months ended September 30, 2020 to the nine months ended September 30, 2021 resulting primarily from the repayment of two secured loans during the 2021 period with no comparable repayments during the 2020 period. These increases in cash outflows were offset by $200.0 million of net proceeds received from the issuance of common shares under our “at-the-market” equity program during the nine months ended September 30, 2021, with no comparable cash inflows during the corresponding 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 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 dividends to 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 2021 fiscal year, we expect recurring capital expenditures to be approximately $1.0 million to $6.0 million, planned capital improvements and store upgrades to be approximately $1.0 million to $6.0 million and costs associated with the development of new stores to be approximately $2.5 million to $12.5 million. Our currently scheduled principal payments on our outstanding debt are approximately $0.6 million for the remainder of 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 Amended and Restated 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 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.

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

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number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. 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 of us.

As of September 30, 2021, we had approximately $20.3 million in available cash and cash equivalents. In addition, we had approximately $749.4 million of availability for borrowings under our Amended and Restated Credit Facility.

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”):

	September 30,		December 31,		Effective		Issuance	Maturity
Unsecured Senior Notes	2021		2020		Interest Rate		Date	Date
	(in thousands)
$300M 4.375% Guaranteed Notes due 2023 (1)	$	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
$300M 3.125% Guaranteed Notes due 2026		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
$350M 3.000% Guaranteed Notes due 2030		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		2,050,000		2,050,000
Less: Discount on issuance of unsecured senior notes, net		(6,894)		(7,470)
Less: Loan procurement costs, net		(10,853)		(12,158)
Total unsecured senior notes, net	$	2,032,253	$	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 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 September 30, 2021, the Operating Partnership was in compliance with all of the financial covenants under the Senior Notes.

Revolving Credit Facility

On December 9, 2011, we entered into a credit agreement (the “Credit Facility”). 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

46

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%.

As of September 30, 2021, borrowings under the Revolver had an effective interest rate of 1.18%. Additionally, as of September 30, 2021, $749.4 million was available for borrowing under the Revolver. The available balance under the Revolver is reduced by an outstanding letter of credit of $0.6 million.

Under the 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 September 30, 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 common shares through sales agents pursuant to equity distribution agreements (the “Equity Distribution Agreements”).

During the nine months ended September 30, 2021, we sold a total of 5.0 million common shares at an average sales price of $40.57 per share, resulting in net proceeds of $200.0 million, after deducting offering costs. We used the proceeds from the 2021 sales under the program to fund the acquisition and development of self-storage properties and for general corporate purposes. As of September 30, 2021, 5.9 million common shares remained available for issuance under the Equity Distribution Agreements.

Non-GAAP Financial Measures

NOI

We define net operating income, which we refer to as “NOI”, as total continuing revenues less continuing property operating expenses. NOI also can be calculated by adding back to net income (loss): interest expense on loans, loan procurement amortization expense, loss on early extinguishment of debt, acquisition related costs, equity in losses of real estate ventures, other expense, depreciation and amortization expense, general and administrative expense, and deducting from net income (loss): equity in earnings of real estate ventures, gains from sales of real estate, net, other income, gains from remeasurement of investments in real estate ventures and interest income. NOI is not a measure of performance calculated in accordance with GAAP.

We use NOI as a measure of operating performance at each of our stores, and for all of our stores in the aggregate. NOI should not be considered as a substitute for operating income, net income, cash flows provided by operating, investing and financing activities, or other income statement or cash flow statement data prepared in accordance with GAAP.

We believe NOI is useful to investors in evaluating our operating performance because:

● 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.

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.

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 and nine months ended September 30, 2021 and 2020

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(in thousands)
Net income attributable to the Company’s common shareholders	$	87,650	$	46,891	$	178,134	$	123,292
Add (deduct):
Real estate depreciation and amortization:
Real property		54,120		37,033		159,719		116,062
Company’s share of unconsolidated real estate ventures		2,274		1,893		6,161		5,555
Gains from sales of real estate, net		(28,815)		—		(28,815)		—
Noncontrolling interests in the Operating Partnership		3,149		474		6,466		1,246
FFO attributable to common shareholders and OP unitholders	$	118,378	$	86,291	$	321,665	$	246,155
Add:
Loss on early repayment of debt (1)		—		—		556		—
FFO, as adjusted, attributable to common shareholders and OP unitholders	$	118,378	$	86,291	$	322,221	$	246,155
Weighted average diluted shares outstanding		203,797		194,539		202,291		194,386
Weighted average diluted units outstanding		7,280		1,879		7,330		1,961
Weighted average diluted shares and units outstanding		211,077		196,418		209,621		196,347

(1) For the nine months ended September 30, 2021, loss on early repayment of debt relates to 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

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a portion of our 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.

As of September 30, 2021, our consolidated debt consisted of $2.21 billion of outstanding mortgage loans and notes payable and unsecured senior notes that are subject to fixed rates. Borrowings under our unsecured credit facility are subject to floating rates. Changes in market interest rates have different impacts on the fixed and variable-rate portions of our debt 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 increase by 100 basis points, the fair value of our outstanding fixed-rate mortgage debt and unsecured senior notes would decrease by approximately $125.9 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 $134.6 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.

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 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 September 30, 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
July 1 - July 31	569	$	46.30	N/A	3,000,000
August 1 - August 31	47	$	53.50	N/A	3,000,000
September 1 - September 30	225	$	54.93	N/A	3,000,000
Total	841	$	49.01	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, 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.

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ITEM 6. EXHIBITS

Exhibit No.	Exhibit Description
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)
101	The following CubeSmart and CubeSmart, L.P. financial information for the nine months ended September 30, 2021, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to 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: November 5, 2021	By:	/s/ Christopher P. Marr
		Christopher P. Marr, Chief Executive Officer
		(Principal Executive Officer)
Date: November 5, 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: November 5, 2021	By:	/s/ Christopher P. Marr
		Christopher P. Marr, Chief Executive Officer
		(Principal Executive Officer)
Date: November 5, 2021	By:	/s/ Timothy M. Martin
		Timothy M. Martin, Chief Financial Officer
		(Principal Financial Officer)

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