10-Q - CUBE - Equibles

Table of Contents 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, 2020 .

	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.

<br><br><br><br>
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 4, 2020
Common shares, $0.01 par value per share, of CubeSmart		195,266,443

Table of Contents EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended September 30, 2020 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, 2020, owned a 98.9% interest in the Operating Partnership. The remaining 1.1% 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.
---	---

Table of Contents 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.

Table of Contents 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	36
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	53

Filing Format

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

Table of Contents Forward-Looking Statements

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

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this Report. Any forward-looking statements should be considered in light of the risks and uncertainties referred to in Item 1A. “Risk Factors” in the Parent Company’s and the Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2019 and in the Parent Company’s and the Operating Partnership’s combined Quarterly Report on Form 10-Q for the quarter ended March 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 and other pandemics, 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;

Table of Contents

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

●	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, or war that affect the markets in which we operate;

●	potential environmental and other liabilities;

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

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

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

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

●	other risks identified in the Parent Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2019 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.

Table of Contents PART I. FINANCIAL INFORMATIO N

ITEM 1. FINANCIAL STATEMENTS

CUBESMART AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


		September 30,			December 31,		****
	****	2020		****	2019		****
		(unaudited)

ASSETS
Storage properties		$	4,814,261		$	4,699,844
Less: Accumulated depreciation			(980,312)			(925,359)
Storage properties, net (including VIE assets of $86,409 and $92,612, respectively)			3,833,949			3,774,485
Cash and cash equivalents			3,903			54,857
Restricted cash			2,815			3,584
Loan procurement costs, net of amortization			3,382			4,059
Investment in real estate ventures, at equity			92,249			91,117
Other assets, net			92,272			101,443
Total assets		$	4,028,570		$	4,029,545

LIABILITIES AND EQUITY
Unsecured senior notes, net		$	1,837,219		$	1,835,725
Revolving credit facility			37,300			—
Mortgage loans and notes payable, net			93,707			96,040
Accounts payable, accrued expenses and other liabilities			153,568			137,880
Distributions payable			64,711			64,688
Deferred revenue			27,595			25,313
Security deposits			491			475
Total liabilities			2,214,591			2,160,121

Noncontrolling interests in the Operating Partnership			69,573			62,088

Commitments and contingencies

Equity
Common shares $.01 par value, 400,000,000 shares authorized, 193,748,023 and 193,557,024 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively			1,937			1,936
Additional paid-in capital			2,682,671			2,674,745
Accumulated other comprehensive loss			(669)			(729)
Accumulated deficit			(947,477)			(876,606)
Total CubeSmart shareholders’ equity			1,736,462			1,799,346
Noncontrolling interests in subsidiaries			7,944			7,990
Total equity			1,744,406			1,807,336
Total liabilities and equity		$	4,028,570		$	4,029,545

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents CUBESMART AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)


		Three Months Ended September 30,						Nine Months Ended September 30,					****
	****	2020		****	2019		****	2020		****	2019		****

REVENUES
Rental income		$	146,507		$	142,207		$	427,976		$	409,826
Other property related income			18,916			18,054			52,340			50,651
Property management fee income			7,088			6,286			20,074			17,932
Total revenues			172,511			166,547			500,390			478,409
OPERATING EXPENSES
Property operating expenses			57,101			53,465			168,186			155,010
Depreciation and amortization			38,084			43,379			118,815			122,484
General and administrative			10,193			10,011			30,101			28,958
Total operating expenses			105,378			106,855			317,102			306,452
OTHER (EXPENSE) INCOME
Interest:
Interest expense on loans			(18,984)			(18,207)			(56,367)			(53,858)
Loan procurement amortization expense			(753)			(687)			(2,260)			(2,082)
Equity in (losses) earnings of real estate ventures			(37)			152			(216)			10,940
Other			45			1,647			208			1,304
Total other expense			(19,729)			(17,095)			(58,635)			(43,696)
NET INCOME			47,404			42,597			124,653			128,261
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
Noncontrolling interests in the Operating Partnership			(474)			(426)			(1,246)			(1,283)
Noncontrolling interest in subsidiaries			(39)			(17)			(115)			94
NET INCOME ATTRIBUTABLE TO THE COMPANY’S COMMON SHAREHOLDERS		$	46,891		$	42,154		$	123,292		$	127,072

Basic earnings per share attributable to common shareholders		$	0.24		$	0.22		$	0.64		$	0.67
Diluted earnings per share attributable to common shareholders		$	0.24		$	0.22		$	0.63		$	0.67

Weighted average basic shares outstanding			193,745			192,927			193,652			189,970
Weighted average diluted shares outstanding			194,539			193,817			194,386			190,774

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents CUBESMART AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)


		Three Months Ended September 30,						Nine Months Ended September 30,
	****	2020		****	2019		****	2020		****	2019

NET INCOME		$	47,404		$	42,597		$	124,653		$	128,261
Other comprehensive income:
Unrealized gains on interest rate swaps			—			—			—			232
Reclassification of realized losses on interest rate swaps			20			20			60			50
OTHER COMPREHENSIVE INCOME			20			20			60			282
COMPREHENSIVE INCOME			47,424			42,617			124,713			128,543
Comprehensive income attributable to noncontrolling interests in the Operating Partnership			(474)			(426)			(1,246)			(1,285)
Comprehensive (income) loss attributable to noncontrolling interest in subsidiaries			(39)			(17)			(115)			94
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE COMPANY		$	46,911		$	42,174		$	123,352		$	127,352

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents 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 interests in the Operating Partnership														7,976			7,976						7,976			(7,976)
Net income														37,896			37,896			38			37,934			383
Other comprehensive income, net											20						20						20
Common share distributions ($0.33 per share)														(64,039)			(64,039)						(64,039)			(650)
Balance at March 31, 2020		193,587		$	1,936		$	2,675,867		$	(709)		$	(894,773)		$	1,782,321		$	7,969		$	1,790,290		$	53,845
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 interests in the Operating Partnership														(615)			(615)						(615)			615
Net income														38,505			38,505			38			38,543			389
Other comprehensive income, net											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 interests 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.

Table of Contents 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, 2018		187,145		$	1,871		$	2,500,751		$	(1,029)		$	(791,915)		$	1,709,678		$	6,771		$	1,716,449		$	55,819
Contributions from noncontrolling interests in subsidiaries																				4,828			4,828
Distributions paid to noncontrolling interests in subsidiaries																				(66)			(66)
Acquisition of noncontrolling interest in subsidiary								(9,728)									(9,728)			(272)			(10,000)
Issuance of common shares, net		773			8			24,572									24,580						24,580
Issuance of restricted shares		19
Conversion from units to shares		60			1			1,841									1,842						1,842			(1,842)
Exercise of stock options		140			1			1,048									1,049						1,049
Amortization of restricted shares								798									798						798
Share compensation expense								468									468						468
Adjustment for noncontrolling interest in the Operating Partnership														(6,681)			(6,681)						(6,681)			6,681
Net income (loss)														35,498			35,498			(70)			35,428			358
Other comprehensive income, net											240						240						240			2
Common share distributions ($0.32 per share)														(60,375)			(60,375)						(60,375)			(604)
Balance at March 31, 2019		188,137		$	1,881		$	2,519,750		$	(789)		$	(823,473)		$	1,697,369		$	11,191		$	1,708,560		$	60,414
Distributions paid to noncontrolling interests in subsidiaries																				(8)			(8)
Acquisition of noncontrolling interest in subsidiary								(22,573)									(22,573)			(5,045)			(27,618)
Issuance of common shares, net		3,353			34			110,487									110,521						110,521
Issuance of restricted shares		31
Conversion from units to shares		20						644									644						644			(644)
Exercise of stock options		85			1			961									962						962
Amortization of restricted shares								1,231									1,231						1,231
Share compensation expense								439									439						439
Adjustment for noncontrolling interest in the Operating Partnership														(2,713)			(2,713)						(2,713)			2,713
Net income (loss)														49,420			49,420			(41)			49,379			499
Other comprehensive income, net											20						20						20
Common share distributions ($0.32 per share)														(61,431)			(61,431)						(61,431)			(597)
Balance at June 30, 2019		191,626		$	1,916		$	2,610,939		$	(769)		$	(838,197)		$	1,773,889		$	6,097		$	1,779,986		$	62,385
Contributions from noncontrolling interests in subsidiaries																				2,548			2,548
Distributions paid to noncontrolling interests in subsidiaries																				(68)			(68)
Acquisition of noncontrolling interest in subsidiary								(2,020)									(2,020)			(598)			(2,618)
Issuance of common shares, net		1,773			18			61,214									61,232						61,232
Issuance of restricted shares		1
Exercise of stock options		154			2			1,653									1,655						1,655
Amortization of restricted shares								1,214									1,214						1,214
Share compensation expense								440									440						440
Adjustment for noncontrolling interest in the Operating Partnership														(2,894)			(2,894)						(2,894)			2,894
Net income														42,154			42,154			17			42,171			426
Other comprehensive income, net											20						20						20
Common share distributions ($0.32 per share)														(62,048)			(62,048)						(62,048)			(597)
Balance at September 30, 2019		193,554		$	1,936		$	2,673,440		$	(749)		$	(860,985)		$	1,813,642		$	7,996		$	1,821,638		$	65,108

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents CUBESMART AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


		Nine Months Ended September 30,
	****	2020		****	2019
Operating Activities
Net income		$	124,653		$	128,261
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization			121,075			124,566
Equity in losses (earnings) of real estate ventures			216			(10,940)
Equity compensation expense			5,374			4,990
Accretion of fair market value adjustment of debt			(530)			(541)
Changes in other operating accounts:
Other assets			(6,964)			(8,094)
Accounts payable and accrued expenses			21,854			19,336
Other liabilities			2,153			2,274
Net cash provided by operating activities		$	267,831		$	259,852
Investing Activities
Acquisitions of storage properties			(82,968)			(63,499)
Additions and improvements to storage properties			(41,968)			(28,520)
Development costs			(34,163)			(94,251)
Cash paid for partner's interest in real estate venture, net of cash, cash equivalents and restricted cash acquired			—			(117,959)
Investment in real estate ventures			(5,914)			(6,558)
Cash distributed from real estate ventures			4,566			5,513
Net cash used in investing activities		$	(160,447)		$	(305,274)
Financing Activities
Proceeds from:
Unsecured senior notes			—			347,746
Revolving credit facility			273,774			856,011
Principal payments on:
Revolving credit facility			(236,474)			(917,494)
Unsecured term loans			—			(200,000)
Mortgage loans and notes payable			(1,898)			(11,027)
Loan procurement costs			—			(3,104)
Settlement of hedge transactions			—			(807)
Acquisition of noncontrolling interest in subsidiary, net			—			(35,408)
Proceeds from issuance of common shares, net			(232)			196,333
Cash paid upon vesting of restricted shares			(665)			(400)
Exercise of stock options			626			3,666
Contributions from noncontrolling interests in subsidiaries			—			48
Distributions paid to noncontrolling interests in subsidiaries			(161)			(142)
Distributions paid to common shareholders			(192,160)			(181,811)
Distributions paid to noncontrolling interests in Operating Partnership			(1,917)			(1,823)
Net cash (used in) provided by financing activities		$	(159,107)		$	51,788
Change in cash, cash equivalents and restricted cash			(51,723)			6,366
Cash, cash equivalents and restricted cash at beginning of period			58,441			6,482
Cash, cash equivalents and restricted cash at end of period		$	6,718		$	12,848
Supplemental Cash Flow and Noncash Information
Cash paid for interest, net of interest capitalized		$	62,937		$	53,176
Supplemental disclosure of noncash activities:
Acquisitions of storage properties		$	(2,623)		$	—
Proceeds held in escrow from real estate venture's sale of real estate (see note 4)		$	—		$	8,288
Noncash consideration for acquisition of partner's interest in real estate venture (see note 4)		$	—		$	(8,288)
Discount on issuance of unsecured senior notes		$	—		$	2,254
Noncash drawdown on revolving credit facility		$	—		$	103,938
Repayment of unsecured term loan through noncash drawdown on revolving credit facility		$	—		$	(100,000)
Accretion of put liability		$	4,716		$	4,671
Derivative valuation adjustment		$	60		$	282
Loan procurement costs		$	—		$	(3,770)
Issuance of OP units (see note 4)		$	9,000		$	—
Acquisition of noncontrolling interest in subsidiary		$	—		$	(4,828)
Contributions from noncontrolling interests in subsidiaries		$	—		$	7,328

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents CUBESMART, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)


		September 30,			December 31,		****
	****	2020		****	2019		****
		(unaudited)

ASSETS
Storage properties		$	4,814,261		$	4,699,844
Less: Accumulated depreciation			(980,312)			(925,359)
Storage properties, net (including VIE assets of $86,409 and $92,612, respectively)			3,833,949			3,774,485
Cash and cash equivalents			3,903			54,857
Restricted cash			2,815			3,584
Loan procurement costs, net of amortization			3,382			4,059
Investment in real estate ventures, at equity			92,249			91,117
Other assets, net			92,272			101,443
Total assets		$	4,028,570		$	4,029,545

LIABILITIES AND CAPITAL
Unsecured senior notes, net		$	1,837,219		$	1,835,725
Revolving credit facility			37,300			—
Mortgage loans and notes payable, net			93,707			96,040
Accounts payable, accrued expenses and other liabilities			153,568			137,880
Distributions payable			64,711			64,688
Deferred revenue			27,595			25,313
Security deposits			491			475
Total liabilities			2,214,591			2,160,121

Limited Partnership interests of third parties			69,573			62,088

Commitments and contingencies

Capital
Operating Partner			1,737,131			1,800,075
Accumulated other comprehensive loss			(669)			(729)
Total CubeSmart, L.P. capital			1,736,462			1,799,346
Noncontrolling interests in subsidiaries			7,944			7,990
Total capital			1,744,406			1,807,336
Total liabilities and capital		$	4,028,570		$	4,029,545

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents 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,
	2020		****	2019		****	2020		****	2019

REVENUES
Rental income	$	146,507		$	142,207		$	427,976		$	409,826
Other property related income		18,916			18,054			52,340			50,651
Property management fee income		7,088			6,286			20,074			17,932
Total revenues		172,511			166,547			500,390			478,409
OPERATING EXPENSES
Property operating expenses		57,101			53,465			168,186			155,010
Depreciation and amortization		38,084			43,379			118,815			122,484
General and administrative		10,193			10,011			30,101			28,958
Total operating expenses		105,378			106,855			317,102			306,452
OTHER (EXPENSE) INCOME
Interest:
Interest expense on loans		(18,984)			(18,207)			(56,367)			(53,858)
Loan procurement amortization expense		(753)			(687)			(2,260)			(2,082)
Equity in (losses) earnings of real estate ventures		(37)			152			(216)			10,940
Other		45			1,647			208			1,304
Total other expense		(19,729)			(17,095)			(58,635)			(43,696)
NET INCOME		47,404			42,597			124,653			128,261
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
Noncontrolling interest in subsidiaries		(39)			(17)			(115)			94
NET INCOME ATTRIBUTABLE TO CUBESMART L.P.		47,365			42,580			124,538			128,355
Operating Partnership interests of third parties		(474)			(426)			(1,246)			(1,283)
NET INCOME ATTRIBUTABLE TO COMMON UNITHOLDERS	$	46,891		$	42,154		$	123,292		$	127,072

Basic earnings per unit attributable to common unitholders	$	0.24		$	0.22		$	0.64		$	0.67
Diluted earnings per unit attributable to common unitholders	$	0.24		$	0.22		$	0.63		$	0.67

Weighted average basic units outstanding		193,745			192,927			193,652			189,970
Weighted average diluted units outstanding		194,539			193,817			194,386			190,774

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents CUBESMART, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)


		Three Months Ended September 30,						Nine Months Ended September 30,
	****	2020		****	2019		****	2020		****	2019

NET INCOME		$	47,404		$	42,597		$	124,653		$	128,261
Other comprehensive income:
Unrealized gains on interest rate swaps			—			—			—			232
Reclassification of realized losses on interest rate swaps			20			20			60			50
OTHER COMPREHENSIVE INCOME			20			20			60			282
COMPREHENSIVE INCOME			47,424			42,617			124,713			128,543
Comprehensive income attributable to Operating Partnership interests of third parties			(474)			(426)			(1,246)			(1,285)
Comprehensive (income) loss attributable to noncontrolling interest in subsidiaries			(39)			(17)			(115)			94
COMPREHENSIVE INCOME ATTRIBUTABLE TO OPERATING PARTNER		$	46,911		$	42,174		$	123,352		$	127,352

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents 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, net					20		20				20
Common OP unit distributions ($0.33 per unit)			(64,039)				(64,039)				(64,039)		(650)
Balance at March 31, 2020	193,587	$	1,783,030	$	(709)	$	1,782,321	$	7,969	$	1,790,290	$	53,845
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, net					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 Limited 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.

Table of Contents 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, 2018	187,145	$	1,710,707	$	(1,029)	$	1,709,678	$	6,771	$	1,716,449	$	55,819
Contributions from noncontrolling interests in subsidiaries									4,828		4,828
Distributions to noncontrolling interests in subsidiaries									(66)		(66)
Acquisition of noncontrolling interest in subsidiary			(9,728)				(9,728)		(272)		(10,000)
Issuance of common OP units, net	773		24,580				24,580				24,580
Issuance of restricted OP units	19
Conversion from OP units to shares	60		1,842				1,842				1,842		(1,842)
Exercise of OP unit options	140		1,049				1,049				1,049
Amortization of restricted OP units			798				798				798
OP unit compensation expense			468				468				468
Adjustment for Limited Partnership interests of third parties			(6,681)				(6,681)				(6,681)		6,681
Net income (loss)			35,498				35,498		(70)		35,428		358
Other comprehensive income, net					240		240				240		2
Common OP unit distributions ($0.32 per unit)			(60,375)				(60,375)				(60,375)		(604)
Balance at March 31, 2019	188,137	$	1,698,158	$	(789)	$	1,697,369	$	11,191	$	1,708,560	$	60,414
Distributions to noncontrolling interests in subsidiaries									(8)		(8)
Acquisition of noncontrolling interest in subsidiary			(22,573)				(22,573)		(5,045)		(27,618)
Issuance of common OP units, net	3,353		110,521				110,521				110,521
Issuance of restricted OP units	31
Conversion from OP units to shares	20		644				644				644		(644)
Exercise of OP unit options	85		962				962				962
Amortization of restricted OP units			1,231				1,231				1,231
OP unit compensation expense			439				439				439
Adjustment for Limited Partnership interests of third parties			(2,713)				(2,713)				(2,713)		2,713
Net income (loss)			49,420				49,420		(41)		49,379		499
Other comprehensive income, net					20		20				20
Common OP unit distributions ($0.32 per unit)			(61,431)				(61,431)				(61,431)		(597)
Balance at June 30, 2019	191,626	$	1,774,658	$	(769)	$	1,773,889	$	6,097	$	1,779,986	$	62,385
Contributions from noncontrolling interests in subsidiaries									2,548		2,548
Distributions to noncontrolling interests in subsidiaries									(68)		(68)
Acquisition of noncontrolling interest in subsidiary			(2,020)				(2,020)		(598)		(2,618)
Issuance of common OP units, net	1,773		61,232				61,232				61,232
Issuance of restricted OP units	1
Exercise of OP unit options	154		1,655				1,655				1,655
Amortization of restricted OP units			1,214				1,214				1,214
OP unit compensation expense			440				440				440
Adjustment for Operating Partnership interests of third parties			(2,894)				(2,894)				(2,894)		2,894
Net income			42,154				42,154		17		42,171		426
Other comprehensive income, net					20		20				20
Common OP unit distributions ($0.32 per unit)			(62,048)				(62,048)				(62,048)		(597)
Balance at September 30, 2019	193,554	$	1,814,391	$	(749)	$	1,813,642	$	7,996	$	1,821,638	$	65,108

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents CUBESMART, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


		Nine Months Ended September 30,
	****	2020		****	2019
Operating Activities
Net income		$	124,653		$	128,261
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization			121,075			124,566
Equity in losses (earnings) of real estate ventures			216			(10,940)
Equity compensation expense			5,374			4,990
Accretion of fair market value adjustment of debt			(530)			(541)
Changes in other operating accounts:
Other assets			(6,964)			(8,094)
Accounts payable and accrued expenses			21,854			19,336
Other liabilities			2,153			2,274
Net cash provided by operating activities		$	267,831		$	259,852
Investing Activities
Acquisitions of storage properties			(82,968)			(63,499)
Additions and improvements to storage properties			(41,968)			(28,520)
Development costs			(34,163)			(94,251)
Cash paid for partner's interest in real estate venture, net of cash, cash equivalents and restricted cash acquired			—			(117,959)
Investment in real estate ventures			(5,914)			(6,558)
Cash distributed from real estate ventures			4,566			5,513
Net cash used in investing activities		$	(160,447)		$	(305,274)
Financing Activities
Proceeds from:
Unsecured senior notes			—			347,746
Revolving credit facility			273,774			856,011
Principal payments on:
Revolving credit facility			(236,474)			(917,494)
Unsecured term loans			—			(200,000)
Mortgage loans and notes payable			(1,898)			(11,027)
Loan procurement costs			—			(3,104)
Settlement of hedge transactions			—			(807)
Acquisition of noncontrolling interest in subsidiary, net			—			(35,408)
Proceeds from issuance of common OP units			(232)			196,333
Cash paid upon vesting of restricted OP units			(665)			(400)
Exercise of OP unit options			626			3,666
Contributions from noncontrolling interests in subsidiaries			—			48
Distributions paid to noncontrolling interests in subsidiaries			(161)			(142)
Distributions paid to common OP unitholders			(194,077)			(183,634)
Net cash (used in) provided by financing activities		$	(159,107)		$	51,788
Change in cash, cash equivalents and restricted cash			(51,723)			6,366
Cash, cash equivalents and restricted cash at beginning of period			58,441			6,482
Cash, cash equivalents and restricted cash at end of period		$	6,718		$	12,848
Supplemental Cash Flow and Noncash Information
Cash paid for interest, net of interest capitalized		$	62,937		$	53,176
Supplemental disclosure of noncash activities:
Acquisitions of storage properties		$	(2,623)		$	—
Proceeds held in escrow from real estate venture's sale of real estate (see note 4)		$	—		$	8,288
Noncash consideration for acquisition of partner's interest in real estate venture (see note 4)		$	—		$	(8,288)
Discount on issuance of unsecured senior notes		$	—		$	2,254
Noncash drawdown on revolving credit facility		$	—		$	103,938
Repayment of unsecured term loan through noncash drawdown on revolving credit facility		$	—		$	(100,000)
Accretion of put liability		$	4,716		$	4,671
Derivative valuation adjustment		$	60		$	282
Loan procurement costs		$	—		$	(3,770)
Issuance of OP units (see note 4)		$	9,000		$	—
Acquisition of noncontrolling interest in subsidiary		$	—		$	(4,828)
Contributions from noncontrolling interests in subsidiaries		$	—		$	7,328

See accompanying notes to the unaudited consolidated financial statements. 18

Table of Contents CUBESMART AND CUBESMART, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND NATURE OF OPERATIONS

CubeSmart (the “Parent Company”) operates as a self-managed and self-administered real estate investment trust (“REIT”) with its operations conducted solely through CubeSmart, L.P. and its subsidiaries. CubeSmart, L.P., a Delaware limited partnership (the “Operating Partnership”), operates through an umbrella partnership structure, with the Parent Company, a Maryland REIT, as its sole general partner. In the notes to the consolidated financial statements, we use the terms “the Company”, “we” or “our” to refer to the Parent Company and the Operating Partnership together, unless the context indicates otherwise. As of September 30, 2020, the Company owned 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, 2020, the Parent Company owned approximately 98.9% 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”.

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

Since the first quarter of 2020, the world has been impacted by the spread of a novel strain of coronavirus and the disease that it causes known as COVID-19, which has limited the Company’s ability to operate its business using traditional means. Since mid-March, federal, state and local government agencies in the markets within which the Company operates have issued public health responses aimed at reducing the spread of COVID-19, which include quarantines, stay-at-home orders and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. As a result, the United States has experienced, among other things, an unprecedented increase in unemployment, significant volatility within its debt and equity capital markets and extreme economic contraction.

Despite the operating restrictions placed on many businesses by governmental mandates that promote distancing, self-storage has been designated as an essential business. Accordingly, the Company’s stores have remained open throughout the pandemic to allow for customers to move in, move out, pay rent and access their belongings at all locations. Additionally, with the health and welfare of its teammates and customers in mind, the Company has implemented SmartRental^TM^, a contactless online rental process that eliminates the need for face-to-face interaction, and shifted its corporate headquarters, divisional offices and sales center to remote work.

In late March, in response to the pandemic and certain state and local government orders, the Company paused all rate increases to existing customers and suspended its normal delinquency processes temporarily, which have impacted revenue growth. In May, as permitted by governmental mandates, the Company began resuming its delinquency and rental rate increase processes on a jurisdiction by jurisdiction basis. To date, the Company has not experienced any material degradation in rent collections or occupancy, however future customer behavior and their ability to pay rent will be determined by the duration and scope of the pandemic; actions that have been and continue to be taken by 19

Table of Contents governmental entities, individuals and businesses in response to the pandemic, and; the continued impact on economic activity from the pandemic and actions taken in response thereto.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting and, in the opinion of each of the Parent Company’s and Operating Partnership’s respective management, include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of financial position, results of operations and cash flows for each respective company for the interim periods presented in accordance with generally accepted accounting principles in the United States (“GAAP”). Accordingly, readers of this Quarterly Report on Form 10-Q should refer to the Parent Company’s and the Operating Partnership’s audited financial statements prepared in accordance with GAAP, and the related notes thereto, for the year ended December 31, 2019, which are included in the Parent Company’s and the Operating Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. The results of operations for the three and nine months ended September 30, 2020 and 2019 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.

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 Company is currently assessing the impact of the adoption of the new standard on its consolidated financial statements and related disclosures.

In May 2020, the SEC adopted amendments to requirements for companies relating to significant acquisitions and dispositions of businesses as well as amendments to the significance tests in the ‘significant subsidiary’ definition. The amendments are effective on January 1, 2021, with early adoption permitted. The Company has elected to early adopt the amendments.

In June 2016, the FASB issued ASU No. 2016-13 – Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new guidance changes how entities measure credit losses for most financial assets. This standard requires an entity to estimate its lifetime expected credit loss and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. In November 2018, the FASB issued ASU No. 2018-19 – Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarifies that receivables arising from operating leases are within the scope of the leasing standard (ASU No. 2016-02), and not within the scope of ASU No. 2016-13. The standard became effective on January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Table of Contents 3. STORAGE PROPERTIES

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


		September 30,			December 31,
	****	2020		****	2019
		(in thousands)
Land		$	908,051		$	858,541
Buildings and improvements			3,692,519			3,619,594
Equipment			125,204			128,111
Construction in progress			88,487			93,598
Storage properties			4,814,261			4,699,844
Less: Accumulated depreciation			(980,312)			(925,359)
Storage properties, net		$	3,833,949		$	3,774,485

The following table summarizes the Company’s acquisition and disposition activity during the period beginning on January 1, 2019 through September 30, 2020.


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

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
						3		$	74,675

2019 Acquisitions:

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

2019 Disposition:

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

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

Table of Contents 4. INVESTMENT ACTIVITY

2020 Acquisitions

During the nine months ended September 30, 2020, the Company acquired three stores located in Maryland (1), New Jersey (1) and Texas (1) for an aggregate purchase price of approximately $74.7 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 $2.5 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, 2020 was approximately $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.

As of September 30, 2020, the Company had made aggregate deposits of $0.3 million associated with two stores that were under contract to be acquired for an aggregate acquisition price of $14.7 million. The deposits are reflected in Other assets, net on the Company’s consolidated balance sheets.

2019 Acquisitions

During the year ended December 31, 2019, the Company acquired 11 stores located in Arizona (1), California (1), Florida (5), Georgia (1), Maryland (1), South Carolina (1) and Texas (1) for an aggregate purchase price of approximately $118.3 million. In connection with these transactions, which were accounted for as asset acquisitions, the Company allocated the purchase price and acquisition related costs to the tangible and intangible assets acquired based on fair value. Intangible assets consisted of in-place leases, which aggregated to $6.2 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, 2020 was approximately $1.0 million and $3.7 million, respectively. The amortization expense that was recognized during the three and nine months ended September 30, 2019 was approximately $0.5 million and $1.0 million, respectively. In connection with one of the acquisitions, the Company paid $14.9 million of cash and issued OP Units that were valued at approximately $3.6 million as consideration for the purchase price (see note 12).

Additionally, on June 6, 2019, the Company acquired its partner’s 90% ownership interest in HVP III, an unconsolidated real estate venture in which the Company previously owned a 10% noncontrolling interest and that was accounted for under the equity method of accounting. As of the date of acquisition, HVP III owned 18 stores located in Georgia (1), Massachusetts (7), North Carolina (1), South Carolina (7) and Tennessee (2) (the “HVP III Assets”). The purchase price for the 90% ownership interest was $128.3 million, which was comprised of cash consideration of $120.0 million and $8.3 million of the Company’s escrowed proceeds from HVP III’s sale of 50 properties to an unaffiliated buyer on June 5, 2019 (see note 5). The HVP III Assets were recorded by the Company at $137.5 million, which consisted of the $128.3 million purchase price plus the Company’s $10.6 million carryover basis of its previously held equity interest in HVP III, offset by $1.4 million of acquired cash. As a result of the transaction, which was accounted for as an asset acquisition, the HVP III Assets became wholly-owned by the Company and are now consolidated within its financial statements. No gain or loss was recognized as a result of the transaction. In connection with the transaction, the Company allocated the value of the HVP III Assets and acquisition related costs to the tangible and intangible assets acquired based on fair value. Intangible assets consisted of in-place leases, which aggregated to $14.3 million at the time of the acquisition and prior to amortization of such amounts. The estimated life of these in-place leases was 12 months and the amortization expense that was recognized during the nine months ended September 30, 2020 was approximately $6.0 million. The amortization expense that was recognized during the three and nine months ended September 30, 2019 was approximately $3.6 million and $4.8 million, respectively.

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2019 Disposition

On October 7, 2019, the Company sold a self-storage property located in Texas for a sales price of $4.1 million. The Company recorded a $1.5 million gain in connection with the sale.

Development Activity

As of September 30, 2020, the Company had invested in joint ventures to develop five self-storage properties located in Massachusetts (1), New York (2), Pennsylvania (1) and Virginia (1). Construction for all projects is expected to be completed by the first quarter of 2022 (see note 12). As of September 30, 2020, development costs incurred to date for these projects totaled $71.8 million. Total construction costs for these projects are expected to be $132.4 million. These costs are capitalized to construction in progress while the projects are under development and are reflected in Storage properties on the Company’s consolidated balance sheets.

The Company has completed the construction and opened for operation the following stores during the period beginning on January 1, 2019 through September 30, 2020. 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)

Brooklyn, NY ^(1)^		1		Q2 2020	100%	$	45,900
Waltham, MA ^(2)^		1		Q3 2019	100%		18,000
Queens, NY ^(1)^		1		Q2 2019	100%		47,500
Bayonne, NJ ^(1) (3)^		1		Q2 2019	100%		25,100
		4				$	136,500

(1)

These stores were previously owned by three separate consolidated joint ventures, of which the Company held a 51% ownership interest in each. On June 25, 2019, the noncontrolling member in the venture that owned the Bayonne, NJ store put its 49% interest in the venture to the Company for $11.5 million. On September 17, 2019, the noncontrolling member in the venture that owned the Queens, NY store put its 49% interest in the venture to the Company for $15.2 million. On September 29, 2020, the noncontrolling member in the venture that owned the Brooklyn, NY store put its 49% interest in the venture to the Company for $10.0 million, of which $1.0 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 12). The cash payments related to these transactions are included in Development costs in the consolidated statements of cash flows.

(2)

On August 8, 2019, the Company, through a joint venture in which the Company owned a 90% interest and that it previously consolidated, completed the construction and opened for operation a store located in Waltham, MA. On September 6, 2019, the Company acquired the noncontrolling member’s 10% interest in the venture for $2.6 million. Prior to this transaction, the noncontrolling member’s interest was reported in Noncontrolling interests in subsidiaries on the consolidated balance sheets. Since the Company retained its controlling interest in the joint venture and the store is now wholly owned, this transaction was accounted for as an equity transaction. The carrying amount of the noncontrolling interest was reduced to zero to reflect the purchase and the $2.0 million difference between the purchase price paid by the Company and the carrying amount of the noncontrolling interest was recorded as an adjustment to equity attributable to the Company, with no gain or loss recorded. In conjunction with the Company’s acquisition of the noncontrolling interest, the $10.5 million related party loan extended by the Company to the venture during the construction period was repaid in full.

(3)	This property is subject to a ground lease.

Table of Contents During the fourth quarter of 2015 and the third quarter of 2017, the Company, through two separate joint ventures in which it owned a 90% interest in each and that were previously consolidated, completed the construction and opened for operation a store located in Queens, NY and a store located in New York, NY, respectively. On June 25, 2019, the Company acquired the noncontrolling member’s 10% interest in the venture that owned the New York, NY store for $18.5 million, and on June 28, 2019, the Company acquired the noncontrolling member’s 10% interest in the venture that owned the Queens, NY store for $9.0 million. Prior to these transactions, the noncontrolling members’ interest in each venture was reported in Noncontrolling interests in subsidiaries on the consolidated balance sheets. Since the Company retained its controlling interest in each joint venture and the stores are now wholly owned, these transactions were accounted for as equity transactions. In each case, the carrying amount of the noncontrolling interest was reduced to zero to reflect the purchase, and the difference between the purchase price paid by the Company and the carrying amount of the noncontrolling interest, which aggregated to $22.6 million, was recorded as an adjustment to equity attributable to the Company, with no gain or loss recorded. The $12.4 million related party loan extended by the Company to the venture that owned the Queens, NY store was repaid in conjunction with the Company’s acquisition of the noncontrolling member’s ownership interest.

5. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES

The Company’s investments in unconsolidated real estate ventures, in which it holds 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	2020	2019	****	2020		2019
191 IV CUBE Southeast LLC ("HVPSE") ^(1)^		10%	14	—		$	5,171	$	—
191 IV CUBE LLC ("HVP IV") ^(2)^		20%	21	21			22,012		23,112
CUBE HHF Northeast Venture LLC ("HHFNE") ^(3)^		10%	13	13			1,739		1,998
CUBE HHF Limited Partnership ("HHF") ^(4)^		50%	35	35			63,327		66,007
			83	69		$	92,249	$	91,117

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

(2)

The stores owned by HVP IV are located in Arizona (2), Connecticut (2), Florida (4), Georgia (2), Maryland (1), Minnesota (1), Pennsylvania (1) and Texas (8). The Company’s total contribution to HVP IV in connection with these store acquisitions was $26.3 million. As of September 30, 2020, HVP IV had $82.2 million outstanding on its $107.0 million secured loan facility, which bears interest at LIBOR plus 1.70% per annum, and matures on May 16, 2021 with options to extend the maturity date through May 16, 2023, subject to satisfaction of certain conditions and payment of the extension fees as stipulated in the loan agreement. As of September 30, 2020, HVP IV also had $55.5 million outstanding under a separate secured loan that bears interest at LIBOR plus 2.75% per annum, and matures on June 9, 2022 with options to extend the maturity date through June 9, 2024, subject to satisfaction of certain conditions and payment of the extension fees as stipulated in the loan agreement.

(3)	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, 2020, 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.

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(4)	The stores owned by HHF are located in North Carolina (1) and Texas (34). As of September 30, 2020, HHF had an outstanding $100.0 million secured loan, which bears interest at 3.59% per annum and matures on April 30, 2021.

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

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

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

The following is a summary of the financial position of the Ventures as of September 30, 2020 and December 31, 2019.


	****	September 30,			December 31,
		2020		****	2019 ^(1)^
Assets		(in thousands)
Storage properties, net		$	668,474		$	552,791
Other assets			22,605			11,997
Total assets		$	691,079		$	564,788

Liabilities and equity
Other liabilities		$	16,779		$	10,064
Debt			361,690			280,392
Equity
CubeSmart			92,249			91,117
Joint venture partners			220,361			183,215
Total liabilities and equity		$	691,079		$	564,788

(1)	Excludes HVPSE as it acquired its initial assets on March 19, 2020.
---	---

Table of Contents The following is a summary of results of operations of the Ventures for the three and nine months ended September 30, 2020 and 2019.


		Three Months Ended September 30,						Nine Months Ended September 30,
	****	2020		****	2019 ^(1)^		****	2020		2019 ^(1) (2)^
		(in thousands)
Total revenues		$	17,622		$	14,027		$	49,024	$	58,305
Operating expenses			(8,424)			(6,518)			(23,344)		(25,762)
Other expenses			(100)			(34)			(334)		(3,113)
Interest expense, net			(2,934)			(2,606)			(8,638)		(11,911)
Depreciation and amortization			(8,823)			(5,908)			(24,346)		(23,829)
Gains from sale of real estate, net			—			—			—		106,667
Net (loss) income		$	(2,659)		$	(1,039)		$	(7,638)	$	100,357
Company’s share of net (loss) income		$	(37)		$	152		$	(216)	$	10,940

(1)	Excludes HVPSE as it acquired its initial assets on March 19, 2020.

(2)	Includes HVP III’s results of operations through June 6, 2019 (date of consolidation).

Capital Storage Partners, LLC (“Capital Storage”)

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

6. 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	****	2020		****	2019		****	Interest Rate		Date	Date	****
		(in thousands)										****
$250M 4.800% Guaranteed Notes due 2022 ^(1)^		$	250,000		$	250,000		4.82	%	Jun-12	Jul-22
$300M 4.375% Guaranteed Notes due 2023 ^(2)^			300,000			300,000		4.33	%	Various ^(2)^	Dec-23
$300M 4.000% Guaranteed Notes due 2025 ^(3)^			300,000			300,000		3.99	%	Various ^(3)^	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
Principal balance outstanding			1,850,000			1,850,000
Less: Discount on issuance of unsecured senior notes, net			(3,558)			(3,860)
Less: Loan procurement costs, net			(9,223)			(10,415)
Total unsecured senior notes, net		$	1,837,219		$	1,835,725

(1)	On October 30, 2020, the Operating Partnership redeemed, in full, its $250.0 million of outstanding 4.800% senior notes due 2022 with proceeds from its $450.0 million of 2.000% senior notes due 2031 issued on October 6, 2020 (see note 16).
---	---

(2)	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

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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%.

(3)

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%.

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

7. REVOLVING CREDIT FACILITY AND UNSECURED TERM LOANS

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

On January 31, 2019, the Company used a portion of the net proceeds from the issuance of $350.0 million of 4.375% Senior Notes due 2029 (the “2029 Notes”) to repay all of the outstanding indebtedness under the $200.0 million unsecured term loan portion of the Credit Facility.

As of September 30, 2020, borrowings under the Revolver had an effective weighted average interest rate of 1.25%. Additionally, as of September 30, 2020, $712.0 million was available for borrowing under the Revolver. The available balance under the Revolver is reduced by an outstanding letter of credit of $0.7 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, 2020, the Company was in compliance with all of its financial covenants.

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

Table of Contents 8. 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	****	2020		****	2019		****	Interest Rate		Date	****
		(in thousands)									****
YSI 26 ^(1)^		$	7,635		$	7,805		4.56	%	Nov-20
YSI 57 ^(1)^			2,680			2,740		4.61	%	Nov-20
YSI 55			21,163			21,547		4.85	%	Jun-21
YSI 24			23,378			24,042		4.64	%	Jun-21
YSI 65			2,275			2,313		3.85	%	Jun-23
YSI 66			30,137			30,588		3.51	%	Jun-23
YSI 68			5,328			5,459		3.78	%	May-24
Principal balance outstanding			92,596			94,494
Plus: Unamortized fair value adjustment			1,303			1,833
Less: Loan procurement costs, net			(192)			(287)
Total mortgage loans and notes payable, net		$	93,707		$	96,040

(1)	These mortgage loans were repaid in full on November 2, 2020.
---	---

As of September 30, 2020 and December 31, 2019, the Company’s mortgage loans payable were secured by certain of its self-storage properties with net book values of approximately $202.3 million and $206.3 million, respectively. The following table represents the future principal payment requirements on the outstanding mortgage loans and notes payable as of September 30, 2020 (in thousands):


2020	$	10,893
2021		45,057
2022		923
2023		31,019
2024		4,704
2025 and thereafter		—
Total mortgage payments		92,596
Plus: Unamortized fair value adjustment		1,303
Less: Loan procurement costs, net		(192)
Total mortgage loans and notes payable, net	$	93,707

9. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table summarizes the changes in accumulated other comprehensive loss by component for the nine months ended September 30, 2020 (in thousands):


	****	Unrealized Gains (Losses)		****
		on Interest Rate Swaps		****
		(in thousands)
Balance at December 31, 2019		$	(729)
Amounts reclassified from accumulated other comprehensive loss			60	^(1)^
Balance at September 30, 2020		$	(669)

(1)	See note 10 for additional information about the effects of the amounts reclassified.

Table of Contents 10. 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, 2020 and December 31, 2019, all derivative instruments entered into by the Company had been settled.

On December 24, 2018, the Company entered into interest rate swap agreements with notional amounts that aggregated to $150.0 million (the “Interest Rate Swaps”) to protect the Company against adverse fluctuations in interest rates by reducing exposure to variability in cash flows relating to interest payments on a forecasted issuance of long-term debt. The Interest Rate Swaps qualified and were designated as cash flow hedges. Accordingly, the Interest Rate Swaps were recorded on the consolidated balance sheet at fair value and the related gains or losses were deferred in shareholders’ equity as accumulated other comprehensive income or loss. These deferred gains and losses were amortized into interest expense during the period or periods in which the related interest payments affected earnings. On January 24, 2019, in conjunction with the issuance of the 2029 Notes, the Company settled the Interest Rate Swaps for $0.8 million. The $0.8 million termination premium will be reclassified from accumulated other comprehensive loss as an increase to interest expense over the life of the 2029 Notes, which mature on February 15, 2029. The change in unrealized losses on interest rate swaps reflects a reclassification of 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, 2020, respectively. The Company estimates that $0.1 million will be reclassified as an increase to interest expense in the next 12 months.

11. 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.

Table of Contents 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, 2020 or December 31, 2019.

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, 2020 and December 31, 2019. The aggregate carrying value of the Company’s debt was $1,968.2 million and $1,931.8 million at September 30, 2020 and December 31, 2019, respectively. The estimated fair value of the Company’s debt was $2,174.2 million and $2,037.6 million at September 30, 2020 and December 31, 2019, respectively. The fair value of debt estimates were based on a discounted cash flow analysis assuming market interest rates for comparable obligations at September 30, 2020 and December 31, 2019. 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 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.

12. NONCONTROLLING INTERESTS

Interests in Consolidated Joint Ventures

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


						Date Opened /	CubeSmart
		Number				Estimated	Ownership	September 30, 2020
Consolidated Joint Ventures	****	of Stores	****	Location	****	Opening	Interest	Total Assets		Total Liabilities		****
								(in thousands)
CS 750 W Merrick Rd, LLC ("Merrick") ^(1)^		1		Valley Stream, NY		Q1 2022 (est.)	51%	$	9,228	$	2,501
CS Valley Forge Village Storage, LLC ("VFV") ^(2)^		1		King of Prussia, PA		Q2 2021 (est.)	70%		13,479		5,155
Shirlington Rd II, LLC ("SH2") ^(3)^		1		Arlington, VA		Q1 2021 (est.)	90%		16,167		1,533
CS 2087 Hempstead Tpk, LLC ("Hempstead") ^(1)^		1		East Meadow, NY		Q1 2021 (est.)	51%		17,508		6,745
CS SDP Newtonville, LLC ("Newton") ^(2)^		1		Newton, MA		Q4 2020 (est.)	90%		15,820		9,300
Shirlington Rd, LLC ("SH1") ^(3)^		1		Arlington, VA		Q2 2015	90%		14,411		166
		6						$	86,613	$	25,400

(1)

The noncontrolling members of Merrick and Hempstead have the option to put their ownership interest in the ventures to the Company for $17.1 million and $6.6 million (the “Put Option”), respectively, within the two-year period after construction of each 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 members of Merrick and Hempstead for $17.1 million and $6.6 million, respectively, 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 in Merrick and Hempstead. The Company is accreting the respective liabilities during the development periods and, as of September 30, 2020, has accrued $2.4 million and $5.1 million, related to Merrick and Hempstead, respectively, which are included in Accounts payable, accrued expenses and other liabilities on the Company’s consolidated balance sheets.

(2)

The Company has related party loan commitments to VFV and Newton to fund a portion of the construction costs. As of September 30, 2020, the Company has funded $1.8 million of the total $12.4 million loan commitment to VFV and $7.5 million of the total $12.1 million loan commitment to Newton, which are included in the total liability amounts within the table above. These loans and the related interest were eliminated for consolidation purposes.

Table of Contents

(3)

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

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

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 1.1% and 1.0% of the outstanding OP Units, as of September 30, 2020 and December 31, 2019, 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.

Table of Contents On December 16, 2019, the Company acquired a store in California for $18.5 million. In conjunction with the closing, the Company paid $14.9 million and issued 106,738 OP Units, valued at approximately $3.6 million, to pay the remaining consideration.

As of September 30, 2020 and December 31, 2019, 2,148,805 and 1,972,308 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, 2020 and December 31, 2019. As of September 30, 2020 and December 31, 2019, the Operating Partnership recorded an increase in the value of OP Units owned by third parties and a corresponding decrease to capital of $2.0 million and $5.9 million, respectively.

13. 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, 2020, administrative and late fees totaled $5.1 million and $15.0 million, respectively. For the three and nine months ended September 30, 2019, administrative and late fees totaled $5.9 million and $17.0 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 ranging from one year to 44 years. Certain of the Company’s leases contain provisions that (1) provide for one or more options to renew, with renewal options that can extend the lease term from one year to 69 years, (2) allow for early termination at certain points during the lease term and/or (3) give the Company the option to purchase the leased property. In all cases, the exercise of the lease renewal, termination and purchase options, if provided for in the lease, are at the Company’s sole discretion. Certain of the Company’s lease agreements, particularly its land leases, require rental payments that are periodically adjusted for inflation using a defined index. None of the Company’s lease agreements contain any material residual value guarantees or material restrictive covenants. As a result of the Company’s election of the package of practical expedients permitted within ASC 842, which among other things, allows for the carryforward of historical lease classification, all of the Company’s lease agreements have been classified as operating leases. 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 32

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

The Company’s right-of-use assets, lease liabilities and other supplemental balance sheet information associated with its operating leases as of September 30, 2020 and December 31, 2019 are summarized in the table below.


		September 30,			December 31,
	****	2020			2019
		(dollars in thousands)
Right-of-use assets ^(1)^		$	36,034		$	41,698
Lease liabilities ^(1)^		$	41,410		$	46,391

Weighted average lease term			35.4	years		35.9	years
Weighted average discount rate			4.74	%		4.74	%

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

For the three and nine months ended September 30, 2020 and 2019, the Company’s lease cost consists of the following components, each of which is included in Property operating expenses within the Company’s consolidated statements of operations:


		Three Months Ended September 30,					Nine Months Ended September 30,
	****	2020		****	2019		2020		****	2019
		(in thousands)
Operating lease cost		$	674		$	749	$	2,167		$	2,558
Short-term lease cost ^(1)^			298			294		881			907
Total lease cost		$	972		$	1,043	$	3,048		$	3,465

(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 the future operating lease liability maturities as of September 30, 2020 (in thousands):


2020	$	508
2021		2,024
2022		2,144
2023		2,195
2024		2,045
2025 and thereafter		83,230
Total operating lease payments		92,146
Less: Imputed interest		(50,736)
Present value of operating lease liabilities	$	41,410

During the three and nine months ended September 30, 2020, the cash paid for amounts included in the measurement of lease liabilities related to the Company’s operating leases was approximately $0.5 million and $1.7 million, respectively, which is included as an operating cash outflow within the consolidated statements of cash flows. During the three and nine months ended September 30, 2019, the cash paid for amounts included in the measurement of lease 33

Table of Contents liabilities related to the Company’s operating leases was approximately $0.6 million and $1.9 million, respectively, which is included as an operating cash outflow within the consolidated statements of cash flows. During the three and nine months ended September 30, 2020 and 2019, the Company did not enter into any lease agreements set to commence in the future.

14. 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.

15. 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, 2020 totaled $1.0 million and $2.8 million, respectively. 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, 2019 totaled $0.7 million and $3.1 million, respectively.

The management agreements for certain joint ventures, other related parties and third-party stores provide for the reimbursement to the Company for certain expenses incurred to manage the stores. These amounts consist of amounts due for management fees, payroll, and other store expenses. The amounts due to the Company were $12.9 million and $10.5 million as of September 30, 2020 and December 31, 2019, respectively, and are reflected in Other assets, net on the Company’s consolidated balance sheets. Additionally, as discussed in note 12, the Company had outstanding mortgage loans receivable from consolidated joint ventures of $9.3 million and $3.1 million as of September 30, 2020 and December 31, 2019, respectively, which are eliminated for consolidation purposes. The Company believes that all of these related-party receivables are fully collectible.

The HVPSE, HVP IV and HHFNE operating agreements provide for acquisition, disposition and other fees payable from HVPSE, HVP IV and HHFNE to the Company upon the closing of a property transaction by HVPSE, HVP IV and HHFNE, or any of their subsidiaries and completion of certain measures as defined in the operating agreements. 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. During the three and nine months ended September 30, 2019, the Company recognized $1.7 million and $1.9 million, respectively, in fees associated with property transactions (including fees associated with HVP III). Property transaction fees are included in Other income on the consolidated statements of operations.

16. SUBSEQUENT EVENTS

On October 6, 2020, the Operating Partnership issued $450.0 million in aggregate principal amount of unsecured senior notes due February 15, 2031, which bear interest at a rate of 2.000% per annum (the “2031 Notes”). The 2031 Notes were priced at 99.074% of the principal amount to yield 2.100% to maturity. Net proceeds from the offering, after deducting underwriting discounts and other transaction expenses, were $442.1 million.

On September 30, 2020, the Operating Partnership provided notice of redemption, in full, of its $250.0 million of outstanding 4.800% senior notes due 2022 (the “2022 Notes”). The Operating Partnership completed the redemption of the 2022 Notes on October 30, 2020, with proceeds from its issuance of the 2031 Notes, at a cash redemption price of $1,084.34 per $1,000 principal amount of the 2022 Notes (inclusive of the make-whole prepayment charge and accrued 34

Table of Contents interest to the redemption date). The remaining net proceeds from the issuance of the 2031 Notes were used to repay all of the outstanding indebtedness under the Revolver and for working capital and other general corporate purposes.

On October 21, 2020, the Company entered into a purchase agreement to acquire a portfolio of eight open and operating self-storage properties for an aggregate purchase price of approximately $540.0 million. The properties are located in Brooklyn, NY, Long Island City, NY, Flushing (Queens), NY, College Point (Brooklyn), NY and Bronx, NY. Consideration for the properties will consist of approximately $201.7 million payable in cash, approximately $183.7 million payable in OP Units and the assumption of approximately $154.6 million of existing fixed-rate secured debt. The Company expects to consummate the acquisition in two tranches in December 2020.

Subsequent to September 30, 2020, the Company also entered into purchase agreements to acquire seven additional self-storage properties for an aggregate purchase price of $89.2 million, that are expected to close at various times during the fourth quarter of 2020.

Table of Contents 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, 2019 and in the Parent Company’s and Operating Partnership’s combined Quarterly Report on Form 10-Q for the quarter ended March 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, 2020 and December 31, 2019, we owned 527 self-storage properties totaling approximately 37.1 million rentable square feet and 523 self-storage properties totaling approximately 36.6 million rentable square feet, respectively. As of September 30, 2020, 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, 2020, we managed 733 stores for third parties (including 105 stores containing an aggregate of approximately 7.5 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 1,260. As of September 30, 2020, we managed stores for third parties in the following 38 states: Alabama, Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington and Wisconsin.

We derive revenues principally from rents received from customers who rent cubes at our self-storage properties under month-to-month leases. Therefore, our operating results depend materially on our ability to retain our existing customers and lease our available self-storage cubes to new customers while maintaining and, where possible, increasing our pricing levels. In addition, our operating results depend on the ability of our customers to make required rental payments to us. Our approach to the management and operation of our stores combines centralized marketing, revenue management and other operational support with local operations teams that provide market-level oversight and management. We believe this approach allows us to respond quickly and effectively to changes in local market conditions, and to maximize revenues by managing rental rates and occupancy levels.

We typically experience seasonal fluctuations in the occupancy levels of our stores, which are generally slightly higher during the summer months due to increased moving activity.

Our results of operations may be sensitive to changes in overall economic conditions that impact consumer spending, including discretionary spending, as well as to increased bad debts due to recessionary pressures. Adverse economic conditions affecting disposable consumer income, such as employment levels, business conditions, interest rates, tax rates, fuel and energy costs, inflation and other matters could reduce consumer spending or cause consumers to shift their spending to other products and services. A general reduction in the level of discretionary spending or shifts in consumer discretionary spending could adversely affect our growth and profitability.

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

We have one reportable segment: we own, operate, develop, manage and acquire self-storage properties.

Table of Contents Our self-storage properties are located in major metropolitan and suburban areas and have numerous customers per store. No single customer represents a significant concentration of our revenues. Our stores in Florida, New York, Texas and California provided approximately 16%, 16%, 9% and 8%, respectively, of total revenues for the nine months ended September 30, 2020.

Summary of Critical Accounting Policies and Estimates

Set forth below is a summary of the accounting policies and estimates that management believes are critical to the preparation of the unaudited consolidated financial statements included in this Report. Certain of the accounting policies used in the preparation of these consolidated financial statements are particularly important for an understanding of the financial position and results of operations presented in the historical consolidated financial statements included in this Report. A summary of significant accounting policies is also provided in the aforementioned notes to our consolidated financial statements (see note 2 to the unaudited consolidated financial statements). These policies require the application of judgment and assumptions by management and, as a result, are subject to a degree of uncertainty. Due to this uncertainty, actual results could differ materially from estimates calculated and utilized by management.

Basis of Presentation

The accompanying consolidated financial statements include all of the accounts of the Company, and its majority-owned and/or controlled subsidiaries. The portion of these entities not owned by the Company is presented as noncontrolling interests as of and during the periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation.

When the Company obtains an economic interest in an entity, the Company evaluates the entity to determine if the entity is deemed a variable interest entity (“VIE”), and if the Company is deemed to be the primary beneficiary, in accordance with authoritative guidance issued by the Financial Accounting Standards Board (“FASB”) on the consolidation of VIEs. 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.

Self-Storage Properties

The Company records self-storage properties at cost less accumulated depreciation. Depreciation on the buildings and equipment is recorded on a straight-line basis over their estimated useful lives, which range from five to 39 years. Expenditures for significant renovations or improvements that extend the useful life of assets are capitalized. Repairs and maintenance costs are expensed as incurred.

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

In allocating the purchase price and acquisition related costs for an acquisition, the Company determines whether the acquisition includes intangible assets or liabilities. The Company allocates a portion of the purchase price to an intangible asset attributable 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 leases in place at acquired stores are at market rates, as the majority of the leases are month-to-month contracts. Accordingly, to date no portion of the purchase price for an acquired property has been allocated to above- or below-market lease intangibles. 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.

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 37

Table of Contents 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 nine months ended September 30, 2020 and 2019.

The Company considers long-lived assets to be “held for sale” upon satisfaction of the following criteria: (a) management commits to a plan to sell a store (or group of stores), (b) the store is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such stores, (c) an active program to locate a buyer and other actions required to complete the plan to sell the store have been initiated, (d) the sale of the store is probable and transfer of the asset is expected to be completed within one year, (e) the store is being actively marketed for sale at a price that is reasonable in relation to its current fair value and (f) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

Typically these criteria are all met when the relevant asset is under contract, significant non-refundable deposits have been made by the potential buyer, the assets are immediately available for transfer and there are no contingencies related to the sale that may prevent the transaction from closing. However, each potential transaction is evaluated based on its separate facts and circumstances. Stores classified as held for sale are reported at the lesser of carrying value or fair value less estimated costs to sell. There were no stores classified as held for sale as of September 30, 2020.

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 nine months ended September 30, 2020 and 2019.

Recent Accounting Pronouncements

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

Results of Operations

The following discussion of our results of operations should be read in conjunction with the consolidated financial statements and the accompanying notes thereto. Historical results set forth in the consolidated statements of operations reflect only the existing stores and should not be taken as indicative of future operations. We consider our same-store portfolio to consist of only those stores owned and operated on a stabilized basis at the beginning and at the end of the applicable periods presented. We consider a store to be stabilized once it has achieved an occupancy rate that we believe, based on our assessment of market-specific data, is representative of similar self-storage assets in the applicable market for a full year measured as of the most recent January 1 and has not been significantly damaged by natural disaster or undergone significant renovation. We believe that same-store results are useful to investors in evaluating our 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, 2020, we owned 477 same-store properties and 50 non-same-store properties. For analytical presentation, all percentages are calculated using the numbers presented in the financial statements contained in this Report. 38

Table of Contents

Acquisition and Development Activities

The comparability of our results of operations is affected by the timing of acquisition and disposition activities during the periods reported. As of September 30, 2020 and 2019, we owned 527 and 519 self-storage properties and related assets, respectively. The following table summarizes the change in number of owned stores from January 1, 2019 through September 30, 2020:


	****	2020	****	2019

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

(1)	On May 24, 2019, the Company acquired a store located in Tempe, AZ for approximately $1.6 million, which is located adjacent to an existing wholly-owned store. Given their proximity to each other, the stores have been combined in our store count, as well as for operational and reporting purposes.
---	---

Factors that Have Impacted and May Continue to Impact Results of Operations

We are not aware of any material trends or uncertainties other than those risks identified in Part I. Item 1A. "Risk Factors," of our Annual Report on Form 10-K for the year ended December 31, 2019 and in Part II. Item 1A. "Risk Factors," of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, that may reasonably be expected to have a material impact, favorable or unfavorable, on our results of operations. However, due to the economic impact of the recent outbreak of a novel coronavirus in the United States, and the disease that it causes known as COVID-19, our ability to operate our business using traditional means has been impacted. Since mid-March, federal, state and local government agencies in the markets within which we operate have issued public health responses aimed at reducing the spread of COVID-19, which include quarantines, stay-at-home orders and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. As a result, the United States has experienced, among other things, an unprecedented increase in unemployment, significant volatility within its debt and equity capital markets and extreme economic contraction.

Despite the operating restrictions placed on many businesses by governmental mandates that promote distancing, self-storage has been designated as an essential business. Accordingly, our stores have remained open throughout the pandemic to allow for customers to move in, move out, pay rent and access their belongings at all locations. Additionally, with the health and welfare of our teammates and customers in mind, we have implemented SmartRental^TM^, our contactless online rental process that eliminates the need for face-to-face interaction, and shifted our corporate headquarters, divisional offices and sales center to remote work.

In late March, in response to the pandemic and certain state and local government orders, we paused all rate increases to existing customers and suspended our normal delinquency processes temporarily, which have impacted our revenue growth. In May, as permitted by governmental mandates, we began resuming our delinquency and rental rate increase processes on a jurisdiction by jurisdiction basis. To date, we have not experienced any material degradation in rent collections or occupancy, however future customer behavior and their ability to pay rent will be determined by the duration and scope of the pandemic; actions that have been and continue to be taken by governmental entities, 39

Table of Contents individuals and businesses in response to the pandemic, and; the continued impact on economic activity from the pandemic and actions taken in response thereto.

We anticipate that if the above-described impacts from the COVID-19 pandemic, and the volatile economic, business and financial market conditions resulting therefrom, continue for an extended period of time, we may see a reduction in customer activity, net effective rental rates and our customers’ ability to make rental payments, all of which would adversely impact our cash flow from operations.

Comparison of the three months ended September 30, 2020 to the three months ended September 30, 2019 (in thousands)


												Non Same-Store						Other/																****
	Same-Store Property Portfolio											Properties						Eliminations						Total Portfolio										****
	****		****	****		****	Increase/		****	%	****	****		****	****		****	****		****	****		****	****		****	****		****	Increase/		****	%	****
	2020			2019			(Decrease)			Change		2020			2019			2020			2019			2020			2019			(Decrease)			Change	****
REVENUES:
Rental income	$	133,700		$	133,277		$	423		0.3	%	$	12,807		$	8,930		$	—		$	—		$	146,507		$	142,207		$	4,300		3.0	%
Other property related income		13,938			14,226			(288)		(2.0)	%		1,678			1,199			3,300			2,629			18,916			18,054			862		4.8	%
Property management fee income		—			—			—		0.0	%		—			—			7,088			6,286			7,088			6,286			802		12.8	%
Total revenues		147,638			147,503			135		0.1	%		14,485			10,129			10,388			8,915			172,511			166,547			5,964		3.6	%

OPERATING EXPENSES:
Property operating expenses		44,543			42,741			1,802		4.2	%		5,143			3,979			7,415			6,745			57,101			53,465			3,636		6.8	%
NET OPERATING INCOME:		103,095			104,762			(1,667)		(1.6)	%		9,342			6,150			2,973			2,170			115,410			113,082			2,328		2.1	%

Store count		477			477								50			42									527			519
Total square footage		33,281			33,281								3,808			3,010									37,089			36,291
Period end occupancy ^(1)^		94.3	%		92.5	%							83.4	%		70.4	%								93.2	%		90.6	%
Period average occupancy ^(2)^		94.4	%		93.0	%
Realized annual rent per occupied sq. ft. ^(3)^	$	17.03		$	17.27

Depreciation and amortization																									38,084			43,379			(5,295)		(12.2)	%
General and administrative																									10,193			10,011			182		1.8	%
Subtotal																									48,277			53,390			(5,113)		(9.6)	%

OTHER (EXPENSE) INCOME
Interest:
Interest expense on loans																									(18,984)			(18,207)			(777)		(4.3)	%
Loan procurement amortization expense																									(753)			(687)			(66)		(9.6)	%
Equity in (losses) earnings of real estate ventures																									(37)			152			(189)		(124.3)	%
Other																									45			1,647			(1,602)		(97.3)	%
Total other expense																									(19,729)			(17,095)			(2,634)		(15.4)	%
NET INCOME																									47,404			42,597			4,807		11.3	%
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
Noncontrolling interests in the Operating Partnership																									(474)			(426)			(48)		(11.3)	%
Noncontrolling interests in subsidiaries																									(39)			(17)			(22)		(129.4)	%
NET INCOME ATTRIBUTABLE TO THE COMPANY’S COMMON SHAREHOLDERS																								$	46,891		$	42,154		$	4,737		11.2	%
(1)	Represents occupancy at September 30th of the respective period.
---	---
(2)	Represents the weighted average occupancy for the period.
---	---
(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 $142.2 million during the three months ended September 30, 2019 to $146.5 million during the three months ended September 30, 2020, an increase of $4.3 million, or 3.0%. The $0.4 million increase in same-store rental income was primarily due to a 1.5% increase in average occupancy for the three months ended September 30, 2020 as compared to the three months ended September 30, 2019. The remaining increase is primarily attributable to $3.9 million of additional rental income from the stores acquired or opened in 2019 and 2020 included in our non-same store portfolio.

Other property related income increased from $18.1 million during the three months ended September 30, 2019 to $18.9 million during the three months ended September 30, 2020, an increase of $0.9 million, or 4.8%. The $0.3 million decrease in same-store other property related income is mainly attributable to a decrease in fee revenue due to the impact of COVID-19. This decrease is offset by a $0.5 million increase in other property related income derived from the stores acquired or opened in 2019 and 2020 included in our non-same store portfolio as well as a $0.7 million increase resulting primarily from increased customer insurance participation at our managed stores.

Table of Contents Property management fee income increased from $6.3 million during the three months ended September 30, 2019 to $7.1 million during the three months ended September 30, 2020, an increase of $0.8 million, or 12.8%. This increase was attributable to an increase in management fees related to the third-party management business resulting from more stores under management (733 stores as of September 30, 2020 compared to 652 stores as of September 30, 2019).

Operating Expenses

Property operating expenses increased from $53.5 million during the three months ended September 30, 2019 to $57.1 million during the three months ended September 30, 2020, an increase of $3.6 million, or 6.8%. The $1.8 million increase in property operating expenses on the same-store portfolio was primarily due to increases in property taxes and advertising costs of $0.5 million and $1.5 million, respectively. The remainder of the increase is attributable to $1.2 million of increased expenses associated with newly acquired or developed stores and $0.7 million of increased expenses associated with the growth in our third-party management program.

Depreciation and amortization decreased from $43.4 million during the three months ended September 30, 2019 to $38.1 million during the three months ended September 30, 2020, a decrease of $5.3 million, or 12.2%. This decrease is primarily attributable to fully amortized intangible assets associated with our 2019 acquisitions.

Other (Expense) Income

Interest expense increased from $18.2 million during the three months ended September 30, 2019 to $19.0 million during the three months ended September 30, 2020, an increase of $0.8 million, or 4.3%. The increase is attributable to a higher amount of outstanding debt during the three months ended September 30, 2020 as compared to the three months ended September 30, 2019. The average outstanding debt balance increased $147.8 million to $2,000.2 million during the three months ended September 30, 2020 as compared to $1,852.4 million during the three months ended September 30, 2019 as the result of borrowings to fund a portion of the Company’s growth. The weighted average effective interest rate on the Company’s outstanding debt for the three months ended September 30, 2020 and 2019 was 3.89% and 4.05%, respectively.

Other income decreased $1.6 million from the three months ended September 30, 2019 compared to the three months ended September 30, 2020, primarily due to fees earned in 2019 in connection with HVP III’s sale of 50 properties. 41

Table of Contents

Comparison of the nine months ended September 30, 2020 to the nine months ended September 30, 2019 (in thousands)


												Non Same-Store						Other/
	Same-Store Property Portfolio											Properties						Eliminations						Total Portfolio
	****		****	****		****	Increase/		****	%	****	****		****	****		****	****		****	****		****	****		****	****		****	Increase/		****	%
	2020			2019			(Decrease)			Change		2020			2019			2020			2019			2020			2019			(Decrease)			Change
REVENUES:
Rental income	$	393,167		$	391,533		$	1,634		0.4	%	$	34,809		$	18,293		$	—		$	—		$	427,976		$	409,826		$	18,150		4.4	%
Other property related income		39,115			41,372			(2,257)		(5.5)	%		4,268			2,452			8,957			6,827			52,340			50,651			1,689		3.3	%
Property management fee income		—			—			—		0.0	%		—			—			20,074			17,932			20,074			17,932			2,142		11.9	%
Total revenues		432,282			432,905			(623)		(0.1)	%		39,077			20,745			29,031			24,759			500,390			478,409			21,981		4.6	%

OPERATING EXPENSES:
Property operating expenses		131,865			127,448			4,417		3.5	%		14,758			9,316			21,563			18,246			168,186			155,010			13,176		8.5	%
NET OPERATING INCOME:		300,417			305,457			(5,040)		(1.6)	%		24,319			11,429			7,468			6,513			332,204			323,399			8,805		2.7	%

Store count		477			477								50			42									527			519
Total square footage		33,281			33,281								3,808			3,010									37,089			36,291
Period end occupancy ^(1)^		94.3	%		92.5	%							83.4	%		70.4	%								93.2	%		90.6	%
Period average occupancy ^(2)^		93.0	%		92.4	%
Realized annual rent per occupied sq. ft. ^(3)^	$	16.95		$	16.97

Depreciation and amortization																									118,815			122,484			(3,669)		(3.0)	%
General and administrative																									30,101			28,958			1,143		3.9	%
Subtotal																									148,916			151,442			(2,526)		(1.7)	%

OTHER (EXPENSE) INCOME
Interest:
Interest expense on loans																									(56,367)			(53,858)			(2,509)		(4.7)	%
Loan procurement amortization expense																									(2,260)			(2,082)			(178)		(8.5)	%
Equity in (losses) earnings of real estate ventures																									(216)			10,940			(11,156)		(102.0)	%
Other																									208			1,304			(1,096)		(84.0)	%
Total other expense																									(58,635)			(43,696)			(14,939)		(34.2)	%

NET INCOME																									124,653			128,261			(3,608)		(2.8)	%
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
Noncontrolling interests in the Operating Partnership																									(1,246)			(1,283)			37		2.9	%
Noncontrolling interests in subsidiaries																									(115)			94			(209)		(222.3)	%
NET INCOME ATTRIBUTABLE TO THE COMPANY’S COMMON SHAREHOLDERS																								$	123,292		$	127,072		$	(3,780)		(3.0)	%
(1)	Represents occupancy at September 30th of the respective period.
---	---
(2)	Represents the weighted average occupancy for the period.
---	---
(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 $409.8 million during the nine months ended September 30, 2019 to $428.0 million during the nine months ended September 30, 2020, an increase of $18.2 million, or 4.4%. The $1.6 million increase in same-store rental income was due primarily to a 0.6% increase in average occupancy for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019. The remaining increase is primarily attributable to $16.5 million of additional rental income from the stores acquired or opened in 2019 and 2020 included in our non-same store portfolio.

Other property related income increased from $50.7 million during the nine months ended September 30, 2019 to $52.3 million during the nine months ended September 30, 2020, an increase of $1.7 million, or 3.3%. The $2.3 million decrease in same-store other property related income is mainly attributable to a decrease in fee revenue due to the impact of COVID-19. This decrease is offset by a $1.8 million increase in other property related income derived from the stores acquired or opened in 2019 and 2020 included in our non-same store portfolio as well as a $2.1 million increase resulting primarily from increased customer insurance participation at our managed stores.

Property management fee income increased from $17.9 million during the nine months ended September 30, 2019 to $20.1 million during the nine months ended September 30, 2020, an increase of $2.1 million, or 11.9%. This increase was attributable to an increase in management fees related to the third-party management business resulting from more stores under management (733 stores as of September 30, 2020 compared to 652 stores as of September 30, 2019).

Table of Contents Operating Expenses

Property operating expenses increased from $155.0 million during the nine months ended September 30, 2019 to $168.2 million during the nine months ended September 30, 2020, an increase of $13.2 million, or 8.5%. The $4.4 million increase in property operating expenses on the same-store portfolio was primarily due to increases in property taxes and advertising costs of $2.6 million and $3.2 million, respectively, offset by decreases in personnel and maintenance costs of $0.9 million and $0.6 million, respectively. The remainder of the increase is attributable to $5.4 million of increased expenses associated with newly acquired or developed stores and $3.3 million of increased expenses associated with the growth in our third-party management program.

Depreciation and amortization decreased from $122.5 million during the nine months ended September 30, 2019 to $118.8 million during the nine months ended September 30, 2020, a decrease of $3.7 million, or 3.0%. This decrease is primarily attributable to fully amortized intangible assets associated with our 2019 acquisitions.

General and administrative expenses increased from $29.0 million during the nine months ended September 30, 2019 to $30.1 million during the nine months ended September 30, 2020, an increase of $1.1 million, or 3.9%. The change is primarily attributable to increased personnel expenses resulting from additional employee headcount to support our growth.

Other (Expense) Income

Interest expense increased from $53.9 million during the nine months ended September 30, 2019 to $56.4 million during the nine months ended September 30, 2020, an increase of $2.5 million, or 4.7%. The increase is attributable to a higher amount of outstanding debt during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019. The average outstanding debt balance increased $146.7 million to $1,975.1 million during the nine months ended September 30, 2020 as compared to $1,828.4 million during the nine months ended September 30, 2019 as the result of borrowings to fund a portion of the Company’s growth. The weighted average effective interest rate on the Company’s outstanding debt for the nine months ended September 30, 2020 and 2019 was 3.92% and 4.09% respectively.

Equity in (losses) earnings of real estate ventures decreased $11.2 million from the nine months ended September 30, 2019 to the nine months ended September 30, 2020. The change is mainly driven by our prior year share of the gains attributable to HVP III, a real estate venture in which we previously owned a 10% interest. The gains were recorded in connection with HVP III’s sale of 50 properties during the nine months ended September 30, 2019.

Other income decreased $1.1 million from the nine months ended September 30, 2019 to the nine months ended September 30, 2020, primarily due to fees earned in 2019 in connection with HVP III’s sale of 50 properties.

Cash Flows

Comparison of the nine months ended September 30, 2020 to the nine months ended September 30, 2019

A comparison of cash flow from operating, investing and financing activities for the nine months ended September 30, 2020 and 2019 is as follows:


		Nine Months Ended September 30,								****
Net cash provided by (used in):	****	2020		****	2019		****	Change		****
		(in thousands)								****

Operating activities		$	267,831		$	259,852		$	7,979
Investing activities		$	(160,447)		$	(305,274)		$	144,827
Financing activities		$	(159,107)		$	51,788		$	(210,895)

Cash provided by operating activities increased from $259.9 million for the nine months ended September 30, 2019 to $267.8 million for the nine months ended September 30, 2020, reflecting an increase of $8.0 million. Our increased cash 43

Table of Contents flow from operating activities was primarily attributable to stores acquired and developed during 2019 and 2020 as well as increased management fees related to the third-party management business resulting from more stores under management (733 stores as of September 30, 2020 compared to 652 stores as of September 30, 2019).

Cash used in investing activities decreased from $305.3 million for the nine months ended September 30, 2019 to $160.4 million for the nine months ended September 30, 2020, reflecting a decrease of $144.8 million. The change was primarily driven by $118.0 million of cash used for the acquisition of our partner’s ownership interest in HVP III, a previously unconsolidated real estate venture, during the nine months ended September 30, 2019, with no comparable payments during the nine months ended September 30, 2020. Additionally, cash used during the nine months ended September 30, 2020 related to the acquisition of three stores and land for an aggregate net purchase price of $84.2 million, while cash used during the nine months ended September 30, 2019 related to the acquisition of six stores, excluding stores owned by HVP III, for an aggregate net purchase price of $60.5 million. Additionally, there was a $60.0 million decrease in development costs from the nine months ended September 30, 2019 compared to the nine months ended September 30, 2020 resulting from the payment of put liabilities associated with three previously consolidated development joint ventures during the 2019 period.

Cash used in financing activities was $159.1 million during the nine months ended September 30, 2020 compared to $51.8 million of cash provided by financing activities during the nine months ended September 30, 2019, reflecting a change of $210.9 million. This change is primarily the result of $347.7 million of net proceeds from our issuance of unsecured senior notes in January 2019, as well as $196.3 million in net proceeds received from the issuance of common shares during the nine months ended September 30, 2019, with no comparable cash inflows during the 2020 period. These reductions in cash inflows were offset by a $200.0 million cash payment made to repay our unsecured term loan in January 2019 and a $98.8 million increase in net revolving credit facility payments during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The change is also impacted by the combined $35.4 million cash outflow for the acquisition of the noncontrolling members’ interests in four separate consolidated joint ventures during the nine months ended September 30, 2019, with no comparable cash outflow during the 2020 period.

Liquidity and Capital Resources

Liquidity Overview

Our cash flow from operations has historically been one of our primary sources of liquidity used to fund debt service, distributions and capital expenditures. We derive substantially all of our revenue from customers who lease space at our stores and fees earned from managing stores. Therefore, our ability to generate cash from operations is dependent on the rents and management fees that we are able to charge and collect from our customers. We believe that the properties in which we invest, self-storage properties, are less sensitive than other real estate product types to near-term economic downturns. However, prolonged economic downturns could adversely affect our cash flows from operations.

In order to qualify as a REIT for federal income tax purposes, the Parent Company is required to distribute at least 90% of REIT taxable income, excluding capital gains, to its shareholders on an annual basis or pay federal income tax. The nature of our business, coupled with the requirement that we distribute a substantial portion of our income on an annual basis, will cause us to have substantial liquidity needs over both the short term and the long term.

Our short-term liquidity needs consist primarily of funds necessary to pay operating expenses associated with our stores, refinancing of certain mortgage indebtedness, interest expense and scheduled principal payments on debt, expected distributions to limited partners and shareholders, capital expenditures and the development of new stores. These funding requirements will vary from year to year, in some cases significantly. For the remainder of the 2020 fiscal year, we expect recurring capital expenditures to be approximately $2.0 million to $7.0 million, planned capital improvements and store upgrades to be approximately $4.0 million to $9.0 million and costs associated with the development of new stores to be approximately $16.0 million to $26.0 million. Our currently scheduled principal payments on our outstanding debt are approximately $10.9 million for the remainder of 2020.

Table of Contents Our most restrictive financial covenants limit the amount of additional leverage we can add; however, we believe cash flows from operations, access to equity financing, including through our “at-the-market” equity program, and available borrowings under our Credit Facility provide adequate sources of liquidity to enable us to execute our current business plan and remain in compliance with our covenants.

Our liquidity needs beyond 2020 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 number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. In addition, dislocation in the United States debt markets may significantly reduce the availability and increase the cost of debt capital, including conventional mortgage financing and commercial mortgage-backed securities financing. There can be no assurance that such capital will be readily available in the future. Our ability to access the equity capital markets will be dependent on a number of factors as well, including general market conditions for REITs and market perceptions about us.

As of September 30, 2020, we had approximately $3.9 million in available cash and cash equivalents. In addition, we had approximately $712.0 million of availability for borrowings under our Amended and Restated Credit Facility.

The COVID-19 pandemic has impacted the cost and availability of debt and equity capital, and may continue to do so. Based upon our substantial current liquidity relative to our capital requirements discussed above, and our strong financial profile and credit ratings, we do not expect such capital market dislocations to have a material impact on our ability to raise capital. However, these market dislocations, if they were to persist for a long period of time or intensify, could impact our ability to raise capital in the future.

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	****	2020		****	2019		****	Interest Rate		Date	Date	****
		(in thousands)										****
$250M 4.800% Guaranteed Notes due 2022 ^(1)^		$	250,000		$	250,000		4.82	%	Jun-12	Jul-22
$300M 4.375% Guaranteed Notes due 2023 ^(2)^			300,000			300,000		4.33	%	Various ^(2)^	Dec-23
$300M 4.000% Guaranteed Notes due 2025 ^(3)^			300,000			300,000		3.99	%	Various ^(3)^	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
Principal balance outstanding			1,850,000			1,850,000
Less: Discount on issuance of unsecured senior notes, net			(3,558)			(3,860)
Less: Loan procurement costs, net			(9,223)			(10,415)
Total unsecured senior notes, net		$	1,837,219		$	1,835,725

(1)	On October 30, 2020, the Operating Partnership redeemed, in full, its $250.0 million of outstanding 4.800% senior notes due 2022 with proceeds from its $450.0 million of 2.000% senior notes due 2031 issued on October 6, 2020 (see Recent Developments section below).
---	---

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(2)

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%.

(3)

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

Revolving Credit Facility and Unsecured Term Loans

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

On January 31, 2019, we used a portion of the net proceeds from the issuance of $350.0 million of 4.375% Senior Notes due 2029 (the “2029 Notes”) to repay all of the outstanding indebtedness under the $200.0 million unsecured term loan portion of the Credit Facility.

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, 2020, we were in compliance with all of our financial covenants.

On June 20, 2011, we entered into an unsecured term loan agreement (the “Term Loan Facility”), which was subsequently amended on June 18, 2013 and August 5, 2014, consisting of, among other things, a $100.0 million unsecured term loan that was scheduled to mature in January 2020. On June 19, 2019, we used an initial advance at closing of the Amended and Restated Credit Facility to repay all of the outstanding indebtedness under the unsecured term loan portion of the Term Loan Facility. Unamortized loan procurement costs of $0.1 million were written off in conjunction with the repayment. 46

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At-the-Market Equity Program

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

We did not sell any common shares under the Equity Distribution Agreements during the nine months ended September 30, 2020. As of September 30, 2020, 14.6 million common shares remained available for issuance under the Equity Distribution Agreements.

Recent Developments

On October 6, 2020, we issued $450.0 million in aggregate principal amount of unsecured senior notes due February 15, 2031, which bear interest at a rate of 2.000% per annum (the “2031 Notes”). The 2031 Notes were priced at 99.074% of the principal amount to yield 2.100% to maturity. Net proceeds from the offering, after deducting underwriting discounts and other transaction expenses, were $442.1 million.

On September 30, 2020, we provided notice of redemption, in full, of our $250.0 million of outstanding 4.800% senior notes due 2022 (the “2022 Notes”). We completed the redemption of the 2022 Notes on October 30, 2020, with proceeds from our issuance of the 2031 Notes, at a cash redemption price of $1,084.34 per $1,000 principal amount of the 2022 Notes (inclusive of the make-whole prepayment charge and accrued interest to the redemption date). The remaining net proceeds from the issuance of the 2031 Notes were used to repay all of the outstanding indebtedness under the Revolver and for working capital and other general corporate purposes.

On October 21, 2020, we entered into a purchase agreement to acquire a portfolio of eight open and operating self-storage properties for an aggregate purchase price of approximately $540.0 million. The properties are located in Brooklyn, NY, Long Island City, NY, Flushing (Queens), NY, College Point (Brooklyn), NY and Bronx, NY. Consideration for the properties will consist of approximately $201.7 million payable in cash, approximately $183.7 million payable in OP Units and the assumption of approximately $154.6 million of existing fixed-rate secured debt. We expect to consummate the acquisition in two tranches in December 2020.

Subsequent to September 30, 2020, we also entered into purchase agreements to acquire seven additional self-storage properties for an aggregate purchase price of $89.2 million, that are expected to close at various times during the fourth quarter of 2020.

Non-GAAP Financial Measures

NOI

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

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

Table of Contents 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.

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 48

Table of Contents 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.

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, 2020 and 2019.


		Three Months Ended September 30,					****	Nine Months Ended September 30,
	****	2020		****	2019		****	2020		****	2019
		(dollars in thousands)
Net income attributable to the Company’s common shareholders		$	46,891		$	42,154		$	123,292		$	127,072

Add (deduct):
Real estate depreciation and amortization:
Real property			37,033			42,599			116,062			120,228
Company’s share of unconsolidated real estate ventures			1,893			1,612			5,555			5,368
Gains from sale of real estate, net ^(1)^			—			—			—			(10,667)
Noncontrolling interests in the Operating Partnership			474			426			1,246			1,283
FFO attributable to common shareholders and OP unitholders		$	86,291		$	86,791		$	246,155		$	243,284

Add:
Loan procurement amortization expense - early repayment of debt			—			—			—			141
FFO, as adjusted, attributable to common shareholders and OP unitholders		$	86,291		$	86,791		$	246,155		$	243,425

Weighted average diluted shares outstanding			194,539			193,817			194,386			190,774
Weighted average diluted units outstanding			1,879			1,866			1,933			1,886
Weighted average diluted shares and units outstanding			196,418			195,683			196,319			192,660

(1)	The nine months ended September 30, 2019 include $10.7 million of gains from sale of real estate, net that are included in the Company’s share of equity in (losses) earnings 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 RIS K

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.

Table of Contents Effect of Changes in Interest Rates on our Outstanding Debt

Our interest rate risk objectives are to limit the impact of interest rate fluctuations on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, we manage our exposure to fluctuations in market interest rates for a portion of our borrowings through the use of derivative financial instruments such as interest rate swaps or caps to mitigate our interest rate risk on a related financial instrument or to effectively lock the interest rate on a portion of our variable rate 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, 2020, our consolidated debt consisted of $1,942.6 million of outstanding mortgage loans and notes payable and unsecured senior notes that are subject to fixed rates. Additionally, as of September 30, 2020, there were $37.3 million of outstanding unsecured credit facility borrowings subject to floating rates. Changes in market interest rates have different impacts on the fixed and variable rate 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 on our variable rate debt increase by 100 basis points, the increase in annual interest expense on our variable rate debt would decrease future earnings and cash flows by approximately $0.4 million a year. If market interest rates on our variable rate debt decrease by 100 basis points, the decrease in interest expense on our variable rate debt would increase future earnings and cash flows by approximately $0.4 million a year.

If market interest rates increase by 100 basis points, the fair value of our outstanding fixed-rate mortgage debt and unsecured senior notes would decrease by approximately $103.8 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 $118.1 million.

ITEM 4. CONTROLS AND PROCEDURE S

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.

Table of Contents 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 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 INFORMATIO N

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 PROCEED S

Recent Sales of Unregistered Securities

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. 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. The OP Units were sold in reliance upon the private placement exemption from registration under Section 4(a)(2) of the Securities Act of 1933, and any common shares of the Parent Company that we might elect to issue in redemption of such OP Units would also be issued in reliance upon the private placement exemption. 51

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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, 2020:


	****	Total<br><br>Number of<br><br>Shares<br><br>Purchased ^(1)^	****	AveragePrice PaidPer Share		****	TotalNumber ofSharesPurchasedas Part ofPubliclyAnnouncedPlans or Programs	****	Maximum<br><br>Number of<br><br>Shares that<br><br>May Yet Be<br><br>Purchased<br><br>Under the<br><br>Plans or<br><br>Programs	****

July 1 - July 31		369		$	28.12		N/A		3,000,000
August 1 - August 31		43		$	31.62		N/A		3,000,000
September 1 - September 30		115		$	32.21		N/A		3,000,000
Total		527		$	29.30		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. 52

Table of Contents ITEM 6. EXHIBITS

Exhibit No.	****	Exhibit Description

4.1		Form of $450.0 million aggregate principal amount of the Operating Partnership’s 2.000% senior notes due February 15, 2031, incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on October 6, 2020.

4.2		Form of CubeSmart Guarantee, incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on October 6, 2020.

4.3		Eighth Supplemental Indenture, dated of as October 6, 2020, among CubeSmart, CubeSmart, L.P. and U.S. Bank National Association, incorporated herein by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K, filed on October 6, 2020.

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

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

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

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

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

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

101		The following CubeSmart and CubeSmart, L.P. financial information for the nine months ended September 30, 2020, 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 6, 2020	By:	/s/ Christopher P. Marr
		Christopher P. Marr, Chief Executive Officer
		(Principal Executive Officer)



Date: November 6, 2020	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 6, 2020	By:	/s/ Christopher P. Marr
		Christopher P. Marr, Chief Executive Officer
		(Principal Executive Officer)



Date: November 6, 2020	By:	/s/ Timothy M. Martin
		Timothy M. Martin, Chief Financial Officer
		(Principal Financial Officer)

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Christopher P. Marr, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of CubeSmart;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Trustees (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: November 6, 2020	/s/ Christopher P. Marr
	Christopher P. Marr
	Chief Executive Officer

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Timothy M. Martin, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of CubeSmart;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: November 6, 2020	/s/ Timothy M. Martin
	Timothy M. Martin
	Chief Financial Officer

Exhibit 31.3

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Christopher P. Marr, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of CubeSmart L.P.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: November 6, 2020	/s/ Christopher P. Marr
	Christopher P. Marr
	Chief Executive Officer

Exhibit 31.4

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Timothy M. Martin, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of CubeSmart L.P.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: November 6, 2020	/s/ Timothy M. Martin
	Timothy M. Martin
	Chief Financial Officer

Exhibit 32.1

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

The undersigned, the Chief Executive Officer and Chief Financial Officer of CubeSmart (the “Company”), each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(a) The Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2020 (the “Report”) filed on the date hereof with the Securities and Exchange Commission fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(b) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: November 6, 2020	/s/ Christopher P. Marr
	Christopher P. Marr
	Chief Executive Officer


Date: November 6, 2020	/s/ Timothy M. Martin
	Timothy M. Martin
	Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

The undersigned, the Chief Executive Officer and Chief Financial Officer of CubeSmart L.P. (the “Company”), each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(b) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: November 6, 2020	/s/ Christopher P. Marr
	Christopher P. Marr
	Chief Executive Officer


Date: November 6, 2020	/s/ Timothy M. Martin
	Timothy M. Martin
	Chief Financial Officer