CubeSmart Q2 FY2026 earnings call

Overall Business Inflection

• 2026 is a year of inflection for CubeSmart, with the company returning to positive growth after 2025 operating fundamental stabilization. Same-store revenue turned positive in early 2026, with management expecting acceleration through the second half of 2026 to return to positive earnings growth.

Demand and Occupancy Trends

• Need-based, diverse demand across use cases reduces reliance on any single demand source, supporting business resilience amid macro volatility impacting U.S. consumers.
• Customer health remains strong: lower vacate activity has lengthened average customer stay lengths, and credit metrics remain solid.
• As of July 30, 2026, same-store physical occupancy reached 91.1%, a 30 bps increase year-over-year, closing the occupancy gap to 2025 levels by the end of Q2 with continued momentum into July.
• Q2 2026 year-over-year move-in rates for new customers rose 1.7%, improving 80 bps sequentially from Q1. Geographic performance varies: strength is seen in the Acela Corridor, Midwest markets (Chicago, Columbus, Cleveland), and West Coast markets (Inland Empire, Los Angeles), which returned to positive year-over-year same-store revenue growth in Q2. Sunbelt markets still face pressure from new supply and macro factors but show gradual sequential improvement.

Capital Allocation and Operational Updates

• Management maintained a disciplined capital allocation strategy, completing three key Q2 objectives: a new non-core asset joint venture with Heitman, continued share repurchases, and an extended, expanded credit facility.
• The new Heitman JV includes 15 contributed non-core assets (isolated markets or outer-ring core market locations), with CubeSmart retaining a 20% stake. The transaction unlocks market-rate value for non-core assets, improves on-balance sheet portfolio quality, creates a new vehicle for future growth alongside Heitman, and all proceeds will be used for accretive share repurchases (the most attractive investment option given the public-private valuation disconnect for self-storage assets).
• The revolving credit facility was amended to extend maturity from February 2027 to June 2030, increase capacity from $850 million to $1 billion, and improve pricing. The balance sheet remains strong, with sufficient flexibility to navigate upcoming debt maturities (one bond matures next quarter, no maturities in 2027 after that).

CubeSmart is a single-segment self-storage business, so no separate product segment financials are reported. For the core same-store self-storage portfolio: Q2 2026 same-store revenue grew 0.8% year-over-year, accelerating from 0.6% growth in Q1 2026. Same-store operating expenses grew 4.4% year-over-year, in line with management expectations. This resulted in a 0.7% year-over-year decline in same-store net operating income (NOI) for the quarter. Adjusted FFO per share for Q2 2026 came in at 63 cents, hitting the midpoint of prior guidance. Year-to-date 2026 share repurchases totaled $75.8 million, with $42.5 million completed in Q2. Third-party management added 25 stores in Q2, ending the quarter with 872 third-party stores under management.

• Full-year 2026 same-store revenue guidance was revised upward to a range of 0.5% to 1.25% year-over-year growth, from the prior lower range. The midpoint of this new range implies continued same-store revenue acceleration in the second half of 2026.
• Full-year 2026 same-store operating expense guidance was modestly adjusted to a range of 3.25% to 4.5% year-over-year growth, reflecting expectations for moderating expense growth in the second half after tough year-over-year comparisons in the first half.
• The midpoints of both same-store NOI and adjusted FFO per share guidance ranges imply a return to positive earnings growth for CubeSmart in the second half of 2026, building a strong foundation for 2027 performance.

• Forward-looking statements about future earnings and strategy are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from projections. Key risk factors are disclosed in the company's SEC filings, including the recently filed Form 8-K and the risk factor section of the annual Form 10-K.
• Persistent new supply headwinds and ongoing macroeconomic pressure on consumers continue to create a challenging pricing environment for new customers in Sunbelt markets.
• There is a significant valuation disconnect between public market valuations for self-storage companies and private market valuations for high-quality self-storage assets, which impacts acquisition and capital allocation decisions.

Q: Michael Griffin (Evercore ISI) asked Chris Marr to expand on the comment that key performance indicators are flashing green. He asked if this improvement only comes from easier year-over-year comparisons and moderating new supply, or if there are unrecognized organic demand trends. / A: Marr explained the improvement covers all factors: there is strong top-of-funnel organic demand across diverse customer use cases. Existing customer health remains solid, with lengthening stay lengths and stable credit metrics. Performance is strong across East Coast and Midwest markets, with improving green shoots for move-in rates in Sunbelt markets, and operating expense trends are on track to improve in the second half, matching expectations.

Q: Griffin followed up by asking Tim Martin for the cap rate on the new Heitman JV transaction, and how management weighs using JV proceeds for share repurchases versus future acquisition opportunities. / A: Martin noted the Heitman transaction and share repurchase plan constitutes active offensive strategy in the current market environment. The transaction was completed at a mid-5% cap rate, allows CubeSmart to improve portfolio quality, retain upside via its 20% stake, and creates a new vehicle for future external growth with Heitman alongside the existing CBRE JV. Proceeds will be used for accretive share repurchases to capitalize on the public-private valuation disconnect, and management is prepared to pursue new acquisition opportunities when market conditions are right.

Q: Michael Goldsmith (UBS) asked why management is more optimistic now and what specific factors are driving the expected acceleration into 2027, plus what the growth cadence will be leading into next year. / A: Marr stated optimism stems from broad-based strong demand in the first half of 2026, highlighting the underlying resilience of self-storage driven by routine life events that create consistent need-based demand. Headwinds from new industry supply are dissipating, and the company's high-quality portfolio is delivering stronger outperformance relative to lower-quality assets, supporting the positive trajectory into 2027. (Call cut off due to technical difficulties mid-answer.)