Wait For A Drop Before Buying This 3.7%-Yielding, Fast-Growing Storage REIT

Jul. 05, 2018 8:14 PM ETCubeSmart (CUBE)1 Comment
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Achilles Research


  • CubeSmart is a fast-growing REIT in the storage sector.
  • The storage REIT has enjoyed very strong A/FFO and dividend growth in recent years.
  • CubeSmart has a strong, investment-grade rated balance sheet.
  • The dividend is covered with A/FFO, but CubeSmart's valuation is very rich.
  • An investment in CUBE yields 3.7 percent.

CubeSmart (NYSE:CUBE) is a fast-growing REIT in the self-storage sector. The real estate investment trust has seen strong A/FFO growth in recent years, thanks to the company's aggressive stance on acquisitions. In lockstep with rising cash flow, CubeSmart has grown its dividend at a fast clip, too. However, CubeSmart's valuation today is very rich, which in turn exposes investors to considerable downside risks. An investment in CUBE comes with an entry yield of 3.7 percent.

CubeSmart - Portfolio Overview

CubeSmart's property portfolio consists of both owned and managed real estate. At the end of the March quarter, CubeSmart owned 485 stores and managed another 496 as part of its third-party management business. The REIT's properties are concentrated in the following top 12 metro markets.

Source: CubeSmart Investor Presentation

What makes CubeSmart particularly attractive as a growth play going forward is that the storage REIT has above-average exposure (relative to its peer group) to top 25 MSA markets.

Source: CubeSmart

CubeSmart's portfolio stats, especially its occupancy rates over time look very good as well. The REIT's occupancy rate has steadily improved in the last seven years, indicating that CubeSmart's storage facilities are met with high customer demand.

Source: Achilles Research

CubeSmart has grown into a national storage player thanks to its acquisition-centered growth strategy. It hasn't been all that uncommon for CubeSmart to spend hundreds of millions of dollars per year on buying new properties that helped the company scale its real estate business.

Source: Achilles Research

Thanks to its heavy focus on acquisitions, CubeSmart has seen exceptional AFFO per-share growth over the years. The REIT's AFFO surged from $0.51/share in 2010 to $1.59/share in 2017, reflecting a total growth rate of 212 percent.

Source: Achilles Research

Decreasing Leverage Stats

CubeSmart has an investment-grade rated balance sheet. Standard & Poor's rates CubeSmart BBB and

ChartCUBE Price to Book Value data by YCharts

This article was written by

Achilles Research profile picture
I am a dividend investor and look for undervalued investments in the stock market. I identify misunderstood and undervalued equity investments and hold those securities until their price approximates my estimate of intrinsic value. I am a long-term investor only. I am building a $100,000 high-yield income portfolio. I am running this portfolio as an experiment to see if long-term sustainable income can be generated from a diversified pool of high-risk, high-yield securities. I am willing to accept high risk in order to meet my performance goals.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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