CubeSmart Q3 Net Income Dips 18% Amid Soaring Expenses

TL;DR

**CubeSmart's Q3 profit drop is a red flag; rising costs are eating into revenue gains, making it a tough hold for now.**

AI Summary

CubeSmart, L.P. reported total revenues of $285.08 million for the three months ended September 30, 2025, an increase of 5.2% from $270.89 million in the same period of 2024. Rental income rose to $243.40 million from $230.95 million, a 5.4% increase. However, net income attributable to the company decreased by 17.7% to $82.93 million in Q3 2025 from $100.80 million in Q3 2024. This decline was primarily driven by a significant increase in operating expenses, with property operating expenses rising 10.9% to $90.85 million and depreciation and amortization jumping 30.2% to $66.69 million. Interest expense on loans also increased by 29.1% to $29.38 million. For the nine months ended September 30, 2025, total revenues were $840.42 million, up from $798.51 million in 2024, but net income attributable to the company fell 11.8% to $255.09 million from $289.29 million. The company's total assets grew to $6.76 billion as of September 30, 2025, from $6.39 billion at December 31, 2024, largely due to an increase in storage properties, net, to $6.38 billion from $6.04 billion.

Why It Matters

CubeSmart's Q3 2025 results show a concerning trend for investors: while revenue is growing, profitability is shrinking due to rising operating and interest expenses. This could signal a challenging environment for REITs, particularly in the self-storage sector, where competition and inflation are driving up costs. For employees, increased operational efficiency demands might arise. Customers could face higher rental rates as the company seeks to offset these rising costs. In the broader market, this performance could put pressure on other self-storage REITs like Public Storage and Extra Space Storage, suggesting a potential industry-wide squeeze on margins.

Risk Assessment

Risk Level: high — The risk level is high due to the significant 17.7% decrease in net income attributable to the company for Q3 2025, falling to $82.93 million from $100.80 million in Q3 2024. This decline is directly linked to a 30.2% increase in depreciation and amortization to $66.69 million and a 29.1% rise in interest expense on loans to $29.38 million, indicating substantial cost pressures and potentially higher debt servicing costs.

Analyst Insight

Investors should consider a cautious approach to CubeSmart, monitoring future filings for signs of expense control and interest rate stabilization. Evaluate the impact of rising interest rates on their debt structure and assess if the company can pass on increased operating costs to customers without impacting occupancy rates.

Financial Highlights

debt To Equity

1.39

revenue

$285.08M

operating Margin

39.2%

total Assets

$6.76B

total Debt

$3.43B

net Income

$82.93M

eps

$0.36

gross Margin

67.3%

cash Position

$108.39M

revenue Growth

+5.2%

Revenue Breakdown

Key Numbers

• $285.08M — Total Revenues (Q3 2025) (Increased 5.2% from $270.89M in Q3 2024)
• $82.93M — Net Income Attributable to the Company (Q3 2025) (Decreased 17.7% from $100.80M in Q3 2024)
• $90.85M — Property Operating Expenses (Q3 2025) (Increased 10.9% from $81.87M in Q3 2024)
• $66.69M — Depreciation and Amortization (Q3 2025) (Increased 30.2% from $51.21M in Q3 2024)
• $29.38M — Interest Expense on Loans (Q3 2025) (Increased 29.1% from $22.75M in Q3 2024)
• $6.38B — Storage Properties, Net (Sept 30, 2025) (Increased from $6.04B at Dec 31, 2024)
• 228,035,931 — Common Shares Outstanding (As of October 29, 2025)
• $0.36 — Basic EPS (Q3 2025) (Decreased from $0.45 in Q3 2024)

Key Players & Entities

• CubeSmart, L.P. (company) — Operating Partnership
• CubeSmart (company) — Parent Company, REIT
• $285.08 million (dollar_amount) — Total revenues for Q3 2025
• $82.93 million (dollar_amount) — Net income attributable to the company for Q3 2025
• $90.85 million (dollar_amount) — Property operating expenses for Q3 2025
• $66.69 million (dollar_amount) — Depreciation and amortization for Q3 2025
• $29.38 million (dollar_amount) — Interest expense on loans for Q3 2025
• $6.76 billion (dollar_amount) — Total assets as of September 30, 2025
• New York Stock Exchange (regulator) — Exchange where CUBE is registered
• SEC (regulator) — Securities and Exchange Commission

FAQ

Risk Factors

• Rising Interest Expenses [high — financial]: Interest expense on loans increased by 29.1% to $29.38 million in Q3 2025. This significant rise, driven by higher debt levels and potentially increased interest rates, directly impacts profitability and could strain cash flow if revenue growth does not keep pace.
• Increased Property Operating Expenses [medium — operational]: Property operating expenses rose by 10.9% to $90.85 million in Q3 2025. This indicates rising costs associated with property maintenance, utilities, and staffing, which are pressuring operating margins.
• Depreciation and Amortization Increase [medium — financial]: Depreciation and amortization expenses surged by 30.2% to $66.69 million in Q3 2025. This substantial increase is likely due to recent capital expenditures and acquisitions, which, while expanding the asset base, also significantly reduce reported net income.
• Competition and Market Saturation [medium — market]: The self-storage industry is competitive, with numerous national and local operators. Increased supply in certain markets could lead to pricing pressures and affect occupancy rates, impacting rental income growth.
• Leverage and Debt Service [medium — financial]: Total liabilities increased to $3.90 billion as of September 30, 2025, with unsecured senior notes comprising a significant portion. The company's ability to service its debt obligations is crucial, especially with rising interest expenses.

Industry Context

The self-storage real estate investment trust (REIT) sector is characterized by stable demand driven by life events such as moving, downsizing, or natural disasters. However, the industry faces increasing competition and potential oversupply in certain markets, leading to pricing pressures. Technology adoption for customer management and operational efficiency is also a growing trend.

Regulatory Implications

As a REIT, CubeSmart must comply with specific tax regulations, including distributing a significant portion of its taxable income to shareholders. Changes in accounting standards or tax laws could impact reporting and profitability. Environmental, social, and governance (ESG) factors are also gaining importance for investors.

What Investors Should Do

1. Monitor expense growth closely.
2. Analyze debt structure and interest rate sensitivity.
3. Evaluate the impact of capital expenditures on future returns.
4. Compare operating margins with peers.

Key Dates

• 2025-09-30: End of Q3 2025 — Reporting period for the latest financial results, showing revenue growth but a decline in net income.
• 2025-12-31: End of Fiscal Year 2024 — Prior period balance sheet comparison point for assets and liabilities.
• 2024-09-30: End of Q3 2024 — Prior year comparable period for income statement analysis, highlighting year-over-year changes.

Glossary

VIE

Variable Interest Entity. A legal entity that is controlled by an enterprise through contractual arrangements rather than through voting interests. (Indicates that a portion of the company's assets and liabilities are held within these entities, affecting consolidated figures.)

Accumulated Depreciation

The total depreciation expense recognized for an asset since it was acquired. (Reduces the book value of storage properties on the balance sheet, impacting net asset value.)

Noncontrolling Interests

The portion of equity in a subsidiary that is not attributable to the parent company. (Represents ownership stakes in subsidiaries that belong to other parties, affecting net income attributable to the parent.)

Deferred Revenue

Revenue that has been received by the company but not yet earned. (Represents future income from services or rentals paid in advance, impacting short-term cash flow.)

Year-Over-Year Comparison

Compared to the prior year's comparable period, CubeSmart has demonstrated revenue growth, with total revenues increasing by 5.2% for Q3 2025. However, this top-line improvement has been overshadowed by a significant decline in net income attributable to the company, which fell by 17.7%. This divergence is primarily driven by substantial increases in operating expenses, notably property operating expenses (+10.9%) and depreciation and amortization (+30.2%), alongside a sharp rise in interest expenses (+29.1%). Total assets have grown, reflecting expansion in storage properties, but the increased liabilities and expenses are pressuring profitability.

Key Financial Figures

• $0.01 — ge on Which Registered Common Shares, $0.01 par value per share, of CubeSmart CUB

Filing Documents

• cube-20250930x10q.htm (10-Q) — 4195KB
• cube-20250930xex31d1.htm (EX-31.1) — 12KB
• cube-20250930xex31d2.htm (EX-31.2) — 12KB
• cube-20250930xex31d3.htm (EX-31.3) — 12KB
• cube-20250930xex31d4.htm (EX-31.4) — 12KB
• cube-20250930xex32d1.htm (EX-32.1) — 10KB
• cube-20250930xex32d2.htm (EX-32.2) — 10KB
• 0001298675-25-000044.txt ( ) — 12800KB
• cube-20250930.xsd (EX-101.SCH) — 66KB
• cube-20250930_cal.xml (EX-101.CAL) — 69KB
• cube-20250930_def.xml (EX-101.DEF) — 387KB
• cube-20250930_lab.xml (EX-101.LAB) — 521KB
• cube-20250930_pre.xml (EX-101.PRE) — 498KB
• cube-20250930x10q_htm.xml (XML) — 2254KB

FINANCIAL INFORMATION

Part I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 33

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 44

Controls and Procedures

Item 4. Controls and Procedures 45

OTHER INFORMATION

Part II. OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 46

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 46

Other Information

Item 5. Other Information 46

Exhibits

Item 6. Exhibits 47 Filing Format This combined Form 10-Q is being filed separately by CubeSmart and CubeSmart, L.P. 4 Table of Contents

Forward-Looking Statements

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

FINANCIAL INFORMATIO N

PART I. FINANCIAL INFORMATIO N

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS CUBESMART AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share data) September 30, December 31, 2025 2024 (unaudited) ASSETS Storage properties $ 8,108,076 $ 7,628,774 Less: Accumulated depreciation ( 1,730,103 ) ( 1,590,588 ) Storage properties, net (includes VIE amounts of $ 375,821 and $ 363,315 , respectively) 6,377,973 6,038,186 Cash and cash equivalents (includes VIE amounts of $ 4,783 and $ 2,907 , respectively) 108,393 71,560 Restricted cash (includes VIE amounts of $ 4,313 and $ 4,439 , respectively) 6,364 6,103 Loan procurement costs, net of amortization 1,781 2,731 Investment in real estate ventures, at equity 74,320 91,973 Other assets, net 188,827 183,628 Total assets $ 6,757,658 $ 6,394,181 LIABILITIES AND EQUITY Unsecured senior notes, net $ 3,223,866 $ 2,780,631 Revolving credit facility — — Mortgage loans and notes payable, net (includes VIE amounts of $ 112,306 and $ 111,728 , respectively) 204,681 205,915 Lease liabilities - finance leases 65,612 65,668 Accounts payable, accrued expenses and other liabilities 246,162 229,581 Distributions payable 119,676 119,600 Deferred revenue 42,723 38,918 Total liabilities 3,902,720 3,440,313 Noncontrolling interests in the Operating Partnership 44,858 51,193 Commitments and contingencies Equity Common shares $ .01 par value, 400,000,000 shares authorized, 228,035,275 and 227,764,975 shares issued and outstanding at September 30, 2025 and December 31, 2024 , respectively 2,280 2,278 Additional paid-in capital 4,295,941 4,285,570 Accumulated other comprehensive loss ( 270 ) ( 330 ) Accumulated deficit ( 1,515,815 ) ( 1,415,662 ) Total CubeSmart shareholders' equity 2,782,136 2,871,856 Noncontrolling interests in subsidiaries 27,944 30,819 Total equity 2,810,080 2,902,675 Total liabilities and equity $ 6,757,658 $

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View this 10-Q filing on SEC EDGAR