Key Takeaways: CUBE reported 1Q21 results last night and raised FY21 guidance, notably the same store top line growth range by +75-100bp while keeping opex essentially unchanged, continuing a string of exceptional results from the subsector. Attempting to pick up a potential signal from the massive data dump in REIT supplementals, it is very interesting that CUBE did not acquire any wholly-owned stores in the quarter (acquired a 50% interest in one location in 2Q for just $3.4 million). Rather CUBE is focusing its external investment on JV development ($120.5 million pipeline), UJV investment (new 20% HVP V joint venture formed in the quarter and acquisitions through HVP IV), and 3PM expansion, all of which carry (or should carry) higher returns on invested equity. This dovetails with EXR essentially telling the Street yesterday that most if not all of its investment will be through UJVs, debt and preferred equity investments and continued 3PM contracts amidst compressing acquisition yields. We are not faulting CUBE or EXR for being more discerning, a measure of conservatism makes sense with a flood of capital chasing returns on acquisitions in the space right now. If anything it just punctuates PSA’s advantage in being able to fund sub-4% acquisitions with ~2% external capital + internally-generated capital, and still earn a reasonable spread / IRR through stabilizing and growing those assets post-acquisition.
Takeaway: Storage REITs tightening underwriting standards on acquisitions?
