Charlie Place - Director, Investor Relations Chris Marr - President and Chief Executive Officer Tim Martin - Chief Financial Officer.

Gaurav Mehta - Cantor Fitzgerald Gwen Clark - Evercore ISI Drew Smith - KeyBanc Capital Markets Juan Sanabria - Bank of America/Merrill Lynch Smedes Rose - Citigroup Jeremy Metz - UBS George Hoglund - Jefferies Paul Adornato - BMO Capital Markets David Corak - FBR Jonathan Hughes - Raymond James Ryan Burke - Green Street Advisors Todd Stender - Wells Fargo.

Good morning and welcome to the CubeSmart’s Third Quarter 2016 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Charlie Place. Please go ahead..

Thank you, Amy. Hello, everyone. Good morning from sunny Malvern, Pennsylvania. Welcome to CubeSmart’s third quarter 2016 earnings call. Participants on today’s call will include Chris Marr, President and Chief Executive Officer and Tim Martin, Chief Financial Officer. Our prepared remarks will be followed by a Q&A session.

In addition to our earnings release, which was issued yesterday evening, supplemental operating and financial data is available under the Investor Relations section of the company’s website at www.cubesmart.com.

The company’s remarks will include certain forward-looking statements regarding earnings and strategy that involve risks, uncertainties and other factors that may cause the actual results to differ materially from those forward-looking statements.

The risks and factors that could cause our actual results to differ materially from forward-looking statements are provided in documents the company furnishes to or files with the Securities and Exchange Commission, specifically the Form 8-K we filed this morning, together with our earnings release filed with the Form 8-K and the Risk Factors section of the company’s annual report on Form 10-K.

In addition, the company’s remarks include reference to non-GAAP measures. A reconciliation between GAAP and non-GAAP measures can be found in the third quarter financial supplement posted on the company’s website at www.cubesmart.com. I will now turn the call over to Chris..

Thank you, Charlie. Another solid quarter in what is turning out to be another solid year. This is our third increase this year in our FFO per share expectations and our same-store NOI guidance.

Same-store revenue growth of 6.2% in the quarter was driven by a 40 basis point contribution from physical occupancy, higher in-place rents and lower discounts. We continue to benefit on our expenses from our various energy management initiatives.

That combination of strong revenue growth and expense controls resulted in our best same-store margin ever reported. Non same-store properties are exceeding our plan on occupancy, revenue and net operating income. We continue to be disciplined in our external growth initiatives. Acquisitions have almost exclusively been single-asset transactions.

We are particularly pleased with our third-party management program’s growth. We now manage 18.2 million square feet across 291 stores. We added 17 additional assets to the program during the quarter.

This is not only an excellent pipeline of current and future acquisition opportunities for us, but contributed $2.7 million of revenue during the quarter. While we were obviously experiencing record levels of top line growth beginning to slow, our customer remains healthy and the demand for our product remains solid.

Looking forward, we are experiencing mainly positive trends in October, same-store rentals exceeding last year and our plan, the same-store occupancy gap to last year expanding from where it was at September 30, street rates on new customers also expanding from where they were at the end of September.

With that, I would like to turn it over to Tim for some further commentary..

Thanks, Chris. All of the details of our third quarter earnings results are reflected in our earnings release and supplemental information package from last evening. Headline results included FFO per share as adjusted of $0.38, representing 11.8% growth over last year.

As Chris mentioned, same-store revenues increased 6.2% and same-store expenses declined by 0.9%, resulting in same-store NOI growth of 9.3%. Revenue growth was driven by a 5.8% increase in rental rates and another strong occupancy quarter, as we ended the quarter up 40 basis points year-over-year, with ending occupancy of 93.1%.

Expense growth continues to be controlled, as we had flat personnel costs and lower cost in utilities, R&M and property insurance expenses. From a guidance perspective, we increased our expectations for same-store net operating income to 10% growth for the year at the midpoint.

We also increased our FFO per share as adjusted guidance by $0.015 at the midpoint to a new range of $1.43 to $1.44 per share. We remain active and disciplined on the external growth front. Our current year activity and information on our development of C/O pipeline is detailed in our materials.

During the quarter, we closed on the acquisition of seven properties for just under $80 million. We also added another 17 assets to our third-party management platform during the quarter, bringing the total managed portfolio up to 291 stores.

On the capital raising front, we were active during the quarter utilizing our at the market equity program, raising $47.5 million at an average price of $30.26 per share. Also, during the third quarter, we were in the market with our fourth bond issue, closing on $300 million of 3.175% 10-year notes in August.

Proceeds from the offering were used to repay amounts borrowed under our line of credit to fund external growth and to provide capital to fund the redemption of our preferred shares coming up here in the fourth quarter.

We provided notice of our intent to redeem all $77.5 million of our outstanding 7.75% perpetual preferred shares that we issued back 5 years ago in 2011. That redemption will occur next week on November 2.

Despite our near-term disappointment with our equity valuation, we are encouraged with our third quarter print across the board, both on an absolute and relative basis.

We remain focused on creating long-term shareholder value by maximizing cash flows from our existing portfolio, by continuing our disciplined investment approach and by maintaining our BBB, BAA2 investment grade balance sheet. Thanks as always to everyone for joining us this morning for the call and for your continued interest and support.

That wraps up our introductory remarks.

So Amy, why don’t we open up the call for questions?.

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Gaurav Mehta at Cantor Fitzgerald..

Yes. Thanks. Good morning.

A couple of quick questions, first on your asking rent per square foot, if I look at last few quarters, it has been trending down, this quarter it was 2.3% versus peak of ‘15 it was up 7.3%, I was wondering if you could help us understand the trend and what’s bringing it down?.

Yes. So the asking rent disclosed in our supplemental is a simple average of our asking rents across the same-store portfolio at the end of each month during the quarter. So you can get some fluctuations through in the quarter. But effectively what you are seeing is we had a few quarters last year of very, very high push on Street rates.

And effectively, as you see in the third quarter of this year, on average we were able to push those rates up, I think the number is now 2.3%. Again, I think the demand side is there, it’s just a continued flow of market-by-market as to where we can be with Street rates. I wouldn’t read too much into that number.

Again, that number is like a rack rate on the back of your door in a hotel, that’s what we are asking. I think obviously, the revenue growth on a same-store basis factors in the effective rents that we are achieving when you think about concession, discounting, etcetera..

Okay.

And then I think you mentioned in your prepared remarks that discounts were lower for you guys this quarter, which is different than what your competitors have seen for their portfolios, so could you provide more details on what you are seeing on the concession side?.

Sure. So I think discounts on a pure dollar basis were down in Q3 ‘16 over Q3 ‘15 by about 5.4%. That’s just going to be a reality of very, very high occupancy throughout the quarter, so the need to offer free rent was much more muted than it was a year ago.

If you look at it from discounts as a percentage of rents, 3Q ‘16 at 3%, that was sequentially the same. 2Q ‘16 was also 3%. If you look at it year-over-year, last quarter – fourth quarter of ‘15, that was 3.4%.

So again I think you look at the levers of revenue growth going forward and I think we have squeezed on the discount side likely about as tight as it’s going to get and then on the occupancy side as well.

The contributions to our revenue during the quarter from physical occupancy are also thinner than they have been and likely to be thinner going forward..

Okay. Thank you..

The next question is from Gwen Clark at Evercore ISI..

Hi, good morning.

Can you provide an update on how you are thinking about C/O deals, also if you could address how these assets are leasing up relative to expectations, that would be great?.

Sure. So Gwen, it’s Chris. When we think about what’s going on in the marketplace relative to our certificate of occupancy programs, we have had a challenging time finding deals that pencil. I think the – when you are looking at the risk that you are taking relative to the asking prices from sellers in that line of business, it’s pretty thin today.

So we have been generally, as we always are pretty disciplined in how we are looking at those opportunities and are being probably even a little more selective and choosy than we have been in the past. So there is no shortage of folks who would like to develop self-storage.

I think many are probably finding it difficult to find a buyer at the expectations that they have. In terms of lease-up, I think the macro commentary is that we are – our physical occupancy, our revenues and our net operating income relative to our plan are performing better. And I would say that’s true across the board.

I think you have outliers performing particularly well in both Dallas, with our store on LDJ and in some of our New York City assets. We have stores that are performing basically in line, maybe marginally better than we would have expected in Texas. So all-in-all, I think you take the group, we are quite pleased with how things are going thus far..

Okay, that’s helpful.

Along the same lines, can you talk about how the New York City assets in particular have gone and whether they possibly could have an impact on the operations of your existing stores?.

Yes. I mean they absolutely have an impact on our operations of our existing stores.

And again, I think if you go back to what we expected going into the year just from a macro and you think about the guidance we introduced in February and how that’s trended since that point in time, we looked at the year, we knew that the comps in Q3 and Q4, because we had 7% and 8% revenue growth in those quarters last year, were going to be challenging.

We obviously recognized that the contribution from discounts and occupancy was going to become smaller. We are going to rely entirely on rate. And obviously the results we posted internally have been better than we expected going into the year in each quarter there through.

So I think the impact of eight new stores owned and managed, opening in the Boroughs, on our Boroughs stores was factored into our business planning for this year. The positive is that we have 2,400 customers that we have gotten over the last six months to eight months at those eight stores, leasing 167,000 square feet.

So if you think about that, relative to the occupancy that we had available at the competing stores, its more customers occupying more square feet than we could have satisfied from the stores we are in.

So our thesis in the Boroughs is, with very low square foot per capita, with the challenges in zoning, etcetera, that as long as we continue to see in our modeling that when the new store and the existing store are both at stabilization, that the demand exceeds that 6% or so monthly vacate, we are confident that after the physical occupancy hits stabilization, we will be able to push on rates at those stores because we will have more demand than more supply.

That’s been our thesis that’s playing out currently in the eight or so stores that we have opened in the Boroughs, we think it will continue to play out in that way. In the near-term, if you are just looking at a same-store metric, that metric from a growth perspective will be somewhat under pressure from supply in the Boroughs.

It’s also going to be under pressure from what we did last year. We have a store in Queens where, if you look at revenue growth this quarter versus last quarter, it’s impacted by the fact that we raised rates last year in the 14%, 15% area.

So if you are talking about over a 2-year period, we raised rates 16%, 17%, 18%, I mean we will take that all day long. It’s just the growth rate this quarter is going to be lower, not because of a lack of demand but because of some very, very aggressive price increases a year ago..

Okay, that’s helpful.

So it seems like all-in, the lease-up with the deal development stuff definitely impacted same-store, but in total New York City is trending as expected?.

Yes. I think that’s an accurate summary. Thank you..

Okay, that’s helpful. Thank you very much..

The next question is from Todd Thomas at KeyBanc Capital Markets..

Hi, good morning. This is Drew Smith. I am on for Todd today.

I was wondering – you have been pretty active with acquisitions, just wondering what your appetite is like moving forward and you have expressed that you fund your acquisitions through two-thirds equity, one-third debt, wondering what your appetite and ability is to continue this, given your stock price as of late and if you could just comment on that in general? Thank you..

Sure. When you look at sources and uses of capital as we sit here today, we obviously as detailed in the supplemental, have commitments for JV developments and a few C/O deals that we will fund from our free cash flow and if necessary from leverage. But we are not interested in materially levering off in order to grow simply for growth sake.

So to the extent that it becomes challenging or costly to raise equity against – when you match that up against yields that we can see on stable cash flow assets, we will first look at the use of free cash flow. And if that opportunity is there, that’s great.

If not, we are going to be possibly on the sidelines until things stabilize and we can see a better match between the yields being looked at in the cost of capital. Ideally, obviously our cost of capital will come down here as things stabilize and we will be able to take advantage of that. But we will be very disciplined in the interim..

Great.

And just a follow-up, would you consider dispositions as an avenue for funding acquisitions and capital recycling?.

Yes. We always have, we have sold about $0.5 billion of assets. We will continue to look at opportunities there as a source. We have obviously have a history of leveraging our capital through public-private JVs to acquire. And I think we have got a lot of tools in our toolbox that we can use and we will continue to look at all of them.

I mean this management team has been through a whole lot worse than what we are seeing here over the last couple of weeks. And so we are experienced and prepared to deal with whatever is thrown at us..

Great. Thanks. And just one last follow-up, I am wondering where occupancy is in the portfolio today versus 1 year ago, if you don’t mind? And that’s it for me. Thanks guys..

Yes. No problem. As I mentioned in my pre-remarks, the gap to last year has spiked out over the last week or so. We have been plus or minus 60 basis point spread to where physical occupancy was at this time last year compared to the 40 basis points at the end of September. And as of yesterday, the same-store pool was 92.7% occupied..

Thank you..

The next question is from Juan Sanabria at Bank of America/Merrill Lynch..

Hi, good morning..

Good morning..

I was just hoping you could talk a little bit more about the health of demand, one of your competitors yesterday talked about walk-ins being down a bit, I am just curious on what you are seeing across the different avenues of customer acquisitions and the health of that demand?.

Yes. We are again I think things move in cycles, depending upon the markets across the country. But if you take the same-store pool as a whole and look at it across all of our markets, rental volume, certainly over the last 27 days, this is true even in the last few weeks of September, has been quite strong.

We have got same-store rentals greater – significantly greater than what we would have expected thus far in October. And up in the 3.2% range over what we experienced last year and then again that was last year with lower occupancy, which meant we had more inventory to sell.

So what we see in terms of traffic, it clearly ebbs and flows week-by-week, month-by-month across the country. I think that’s just sort of the nature of our business when we have a customer for whom they make a decision, usually Tuesday, Wednesday for a Saturday purchase. And it’s based on life events.

But overall, as I said in my pre-remarks, the consumer for storage seems to be quite healthy still, in terms of the demand we are seeing. And we are seeing that at move-in rates higher than where we were at this point last year.

So again, I think not to – to separate that from the growth rate, I think the actual just health of the demand and the customer for storage and when we look at who is searching and the search terms they are using, continues to feel very, very good for us relative to how you would have thought about this over multiple cycles..

Great.

And just one other question, if I think about long-term trends and same-store revenue growth, can you give us a sense of what that would be if you stripped out occupancy gains to sort of have a baseline of – kind of what long-term trends should be?.

I mean again, I think that’s hard to separate them in terms of long-term trends. I mean you are back to then saying, if you take out any impact from changes in discount policy and you take out any impact from physical occupancy and you are relying entirely on rate.

And then you accept the fact that slowing that rate through on a quarter-to-quarter or annual basis, again you are moving out 6% of your customers who have gotten significant rate increases, so there is some general natural roll down. Again I think, can you get growth and inflation in rates that is equal to inflation and so that’s step one.

And then given the fact that it’s a short-term purchase and it’s a need-based purchase, can you do better than inflation because of that, I would think yes. So it’s something over time, better than inflationary levels would be a pretty generic answer to that question. I don’t know that I could give you a specific range of percentage growth..

Okay, thank you..

The next question is from Smedes Rose at Citigroup..

Hi, thank you.

You brought on your expenses for the year as part of your increase in the NOI guidance and you mentioned in your opening remarks that some of that was lower energy costs, but I was wondering if you could maybe just talk a little bit more about what you are seeing that’s reducing your expense outlook?.

Hey Smedes, this is Tim, other than utilities or expanding on the utilities component?.

I would say other than utilities, because I think overall, that’s a fairly small piece of your expenses, although maybe I am wrong about that?.

Yes. I mean you can see the relative percentages in the supplemental package, but the expense control has really gotten a lot of contribution from several different areas. Our personnel costs in the quarter are essentially flat.

Our property taxes, we always anticipate – or always, last couple of years, we anticipated certainly more than inflationary type pressure. We aggressively monitor and challenge where we can on the property tax side and so you can see in the quarter property tax is up 1.8%, 3.6% for the year.

On the flip side, personnel costs are largely flat due to a lot of efficiencies we have in how we staff the stores. From an R&M perspective, a lot of that is timing and good fortune. Utilities, we talked about.

Snow removal certainly was a big driver this year, as the beginning of this year benefited by very mild temperatures and very low levels of snow removal costs earlier in 2016.

Now, if you think about 2017 and ultimately providing guidance there, we might have some tough comps on those types of seasonal non-controllable things, like temperature and snow removal costs..

When you look at the personnel costs, can I get – just on the personnel, you mentioned staffing efficiencies and I am just wondering, are you – I mean, is the cost per employee going up and therefore you are maybe using people for less hours or doing more part-time or how are you controlling personnel costs, given there seems to be, across multiple industries, increases especially on lower skilled labor, if you will?.

Yes. Hi, it’s Chris. So I think part of this is just – you got to look backwards and say, we just aren’t – we aren’t a minimum wage payor.

And so when you think about changes in minimum wage at say a big retailer and how that trickles through the marketplace or even changes in how that retailer chooses to pay, it has less of an impact on us than it would be on other operators, who perhaps are – were trying to do good customer service in a minimum wage environment.

So I think part of it is philosophically how we have always felt about our teammates and how we have treated them, same thing on healthcare and benefits. We have always been very, very focused on providing probably above the market benefits because we want our teammates to be healthy. We want them to be – have wellness.

And so I think some of it is we are just less impacted by changes in the marketplace. I think the other is just how we run – overall run the stores in terms of, not necessarily staffing at the store level, but staffing sort of at that layer in between a store teammate and a district manager.

And we have just done much better at how we think about that staffing, how we think about overtime, how we think about making sure we have got the right folks in at the right time of day, that type of thing. And we have just been fortunate to be able to offset inflationary pressures and wage with efficiencies.

I think that’s going to obviously put pressure on us, I think next year, because I think we wrung out those efficiencies. And so now we are going to be back to really being more at market, in terms of growth in that line item..

Okay. And then I just – I wanted to just ask you a little bit on some of the markets that you are in, which sort of continually are highlighted as markets where there is either economic weakness locally or maybe supply concerns and I would be interested in just hearing your thoughts around specifically Dallas and Houston.

And then also in Chicago and Denver, which have been kind of called out, can you maybe just give a little market intel if you will, on what you are seeing there?.

Sure. I think – I mean again, I think it’s a variety of different things that are happening in each market. Chicago, with 3% revenue growth and 6% expense growth – or NOI growth, sorry. There, you have got some supply.

I think that supply is probably in place and affecting and going forward, it may have less of an impact according to our work that we do on market. 16 stores have opened in the Greater Chicago land area in 2016 and there is another nine that are under development.

And I would say roughly 60% of that supply is going to compete with a CubeSmart location in some way or another. So you have some supply there. I think you have some economic issues. You obviously have social issues there as well. We have budgetary issues in the State of Illinois. So I think that’s a piece of it.

I also think if you go back and I think one of the other callers mentioned this, if you go back over 10 years, it’s just a market that never – it’s not a high beta market. So it’s just not a market where you are seeing particularly strong and accelerated highs, you don’t usually see strong and accelerated lows.

Dallas Fort Worth, which is obviously a large MSA, there the economy is healthy. You have got quite a good inflow of new – of people and jobs. But you certainly have very, very strong levels of new supply there.

Again, according to our research, they not only have a significant number opened, we have got 23 opened in the Dallas Fort Worth area in 2016, but there is another 31 that are in some stage of development. So you are going to have pockets there where supply is the issue. I don’t think it’s the economy or the consumer in those markets.

Houston, mix bag, right, a little bit of both. You have got obviously some overhang even though the market is – the market is not as energy focused as it once was. But you have some of that and then you have some supply. We have got 13 stores in – I am sorry 11 stores in Greater Houston that have opened in ‘16 and another 13 that are in development.

Denver is a little bit more of a high beta market. We don’t have really much supply. Well, we have supply. I would not say that supply, to us at least in the stores that we own there is overly impactful. I think there you just had periods where we have been able to push rents very, very aggressively.

And then you have periods where, on a comp basis, the comp is just really tough and we haven’t been able to keep up with those high single-digits, mid double-digit rent pushes.

So again, I think this is the – you are getting on the beauty of a geographically diversified portfolio because markets are going to move, some markets are going to move independently of one another..

Okay, I appreciate that. Thank you..

The next question is from Jeremy Metz at UBS..

Hi guys.

In terms of the rent mark to market, what was the spread between move-in and move-outs in the quarter and how did that compare to the spread last year?.

Sure. So move-in, move-out spread, it was about 1% negative in the quarter and that compared to sort of flattish a quarter ago, a year ago in the third quarter..

Okay. And then in terms of the revenue growth, obviously it’s still very strong, at over 6%.

But it came off about 160 basis points on 2Q, I know you said this was kind of in line with some of your expectations or even better than them when you started the year, but I am just wondering if you could walk us through how that trended July through September.

And then if I have heard you correctly at the beginning, I think you were saying trends were actually across the board accelerating in October from where they ended September?.

Yes. So let me make sure that nobody walks away confused on either one of those. So yes, the revenue growth in Q3 was pretty consistent as you looked at July, August and September. August is a big vacate month and I would say, maybe it was a little bit softer than we would have expected on the move-in side.

The move-in side then accelerated through September and as I mentioned here into October and vacates have been pretty consistent with what we expected.

And then what I said was in October, when you think about where we are today, the spread in physical occupancy to where we were last year is plus or minus, depending upon the day, 60 basis points relative to the 40 bps spread at the end of September. Asking rates are about 3.2% today, higher than they were at this point last year.

That’s up from – I guess the quarterly number was 2.3%. We put it in the supplemental. So we continue to see – and the rental volume is up about 3.2% from where we were last year. So those are positive signs. But as I talked about earlier, the flow-through is not immediate.

So to the extent that October wraps up Monday on a high note, the actual impact of that, when you think about how it flows through the P&L, that’s more of a December-January positive. So I think the quarter is going to be just fine, but I think October’s positives will trickle into next year..

I appreciate that color.

And then if I could just ask you one more Chris, strategically if you had to pick one here in the fourth quarter in this lower leasing season, if it’s occupancy or rate, which would you say – again, if you had to pick one, which would you say you are a little more focused on pushing or holding at this point, just given some of the things you are seeing on the ground and what you have seen this year in some – the pricing that’s already been pretty aggressive that you have pushed?.

Yes. Again, to repeat the line, we are obviously – we are focused on maximizing revenue from each customer over the long-term, I think to be forced to answer your question, in the quarter we would be a little bit more focused on occupancy because it had a longer term impact on the portfolio relative to rate..

Okay. Thank you, guys..

Thanks..

The next question is from George Hoglund at Jefferies..

Hi, good morning guys.

Just wanted to look a little more closely at some of the new developments in New York, so for the properties, for example the one in Queens that opened in February, the 84,000 square foot facility, that occupancy as of quarter end is at 51.9%, which is decently above, for example, the other Queens’ and Brooklyn facilities that were – that have occupancy 36% and 39% that opened at the end of last year, just wondering, so the property that has 51% occupancy, anything you guys are doing different at that facility or any reason why that one is leasing up noticeably faster than the others?.

Yes. So that one, no competition. So no Cube, really no other. So that one is in a pocket where we are taking all the demand and all that demand is new, theoretically. So that’s going to be a difference there relative to the other ones, which are competing with either an existing CubeSmart or another operator..

Okay.

And then just generally speaking, in terms of pace of lease-up in New York, relative to kind of what you guys originally underwrite, kind of how was that trending, does the lease-up time seem to be shortening or lengthening?.

I think when you think about it relative to our expectations going in, macro occupancy is trending ahead of plan, but we would have some properties individually where that’s not true and that’s not unique to any one market.

So again, our white settlement store in Texas for – again back to the micro nature of the business, there is some construction going on around that property, that when finished, we are going to end up with a store in a market with a significant number of brand new multi-family units. And in the long run, we are incredibly excited.

In the short run, that’s leasing up. From a physical occupancy perspective, a little bit slower than planned. And then we have in the same market, LBJ, as I mentioned, is leasing up significantly faster than planned in Dallas on the LBJ.

In New York, East New York Avenue is moving along a little bit faster than we expected, as is – as Tremont was as well. Property like on Northern Boulevard, pretty much spot on with where we thought it was going to be. So the overall message would be better than planned, both in occupancy and revenue and in NOI.

But when you dig into it property-by-property, some are a little bit slower, some are a little bit faster..

Okay.

And then just last question, a couple of your competitors commented that the valet business in New York might be having somewhat of an impact, but people aren’t really sure, any view on that?.

Yes, same. I mean we don’t feel it. But could that be impacting the smaller sized cubes, perhaps but not measurable..

Thanks guys..

The next question is from Paul Adornato at BMO Capital Markets..

Thanks. Good morning.

So are you – do you sense from your research more of a divergence, in terms of pricing and discounting from the competitors today versus a while ago, when things were perhaps more universally strong?.

If you take the competitive set around a particular store and that competitive set being both public and private operators, my answer in macro would be no, that the spreads and changes and pricing and discount methodology have been fairly consistent and remain pretty consistent relative to the last couple of years.

Obviously, on a specific competitor basis, yes things have bounced around maybe a little bit more recently than they had in the past..

Okay.

And I guess over the last few years we have seen a decrease in seasonality as occupancies just continued to climb up and up and so should we expect perhaps a little bit of a reversal there, that is a little bit more seasonality as the environment perhaps softens at the top line and more competition is in the mix?.

Hi Paul, it’s Tim. From a seasonality perspective or anything if you think about the typical occupancy curve, where your occupancies peak in the summer months and then trail off a little bit seasonally, you have seen the tails to that curve come up over the last couple of years.

I think some have attributed that to taking a seasonality out of the business.

I think more so from our perspective, it’s the sign that in those periods, in the outer months, the non-summer months, I think those higher levels of occupancy are more attributable to the fact that the large platforms, like ours, have the ability to capture more than our share – our fair share of the customer demand.

So I think the consumer is behaving similarly today as they would have several years ago. It’s just the large platforms have an advantage and get more of the volume – more of the consumer volume in those other months. So it appears that seasonality is coming out of the business. I don’t think consumer behavior has changed measurably..

So you don’t think that there will be a bit of a reversal just as there was an increase during strength?.

Yes. Hi Paul, its Chris. I think – if the reversal occurred, I don’t think it’s because the gap between the system – the very large balance sheet significant competitive advantage on systems and in digital marketing changes. I think it would only change if just the overall environment in terms of consumer demand changed.

And as I said, in the near-term we don’t see signs of that..

Okay, great. Thank you..

Thanks..

The next question is from David Corak, FBR..

Hi guys. Good morning.

Just building off of your comments on acquisition and your appetite there, obviously a lot of it’s dependent on the price of the stock, but we have been hearing for a few quarters now that there has been a slowdown, I guess on the amount of quality product coming to market and that seller expectations are creating somewhat of a wider bid ask spread there, but all of this makes you think that having your captive pipeline of deals in your management portfolio is pretty advantageous, so can you just give us some color on one, what you are seeing in terms of pricing and volume and expectations in the open market and then how the pricing and expectations differ when an owner of 3PM [ph] asset looks to sell?.

Sure. So I think they are – I think the short answer is they are not that different. Our owners are sophisticated business people. And they have a sense of what market is. I think the difference is, as we have said all along, it’s really more on the perfection of our underwriting.

We are just about as perfect as you can get when you are in there, owning and operating the store, it’s already branded CubeSmart. We already have our teammate operating the store. And we know it top to bottom, both from a physical perspective as well as an economic perspective.

Now cap rates, in our view, on stable assets in the marketplace non-managed haven’t moved up or down materially since the last time we were together on a call. I think seller expectations have stabilized. I think – and think on the third-party side, as you mentioned, that is the beauty of that program, 18 million square feet under management.

If you marked it to market, take a swag at it, it’s over $1.5 billion worth of assets that are potential CubeSmart acquisition candidates. So we bought two stores in the quarter. We made our entry into Minneapolis on an owned basis by borrowing one of our managed stores.

And we bought a beautiful brand new property in Denver, Colorado that was in its early stages of lease-up from the management program in the third quarter as well. So great program, as you pointed out. It has a great pipeline for us of acquisition opportunities when the time is right for the owner to sell..

And the 80 some stores that you have added this year to the program, are they mostly new deliveries or at least kind of newer purpose built product?.

Yes. I am looking here at what was added in the third quarter. I would say its 60-40, probably 60% new, 40% existing assets coming in..

But in general, it’s pretty high quality products?.

Yes..

Okay, great. That’s all for me. Thanks guys..

Thanks..

The next question is from Jonathan Hughes at Raymond James..

Hey, good morning guys. Just had few questions, it looks like some of the delivery dates of your development C/O deals got pushed back, you also added some more in NYC, I m just curious, what’s the driver of the delays.

And then is there any concern of further delay in pushing deliveries back into a slowing growth cycle?.

Yes. The – generally speaking, the delays get back to permitting – get back to the municipality. So it’s just that constant theme. I am sure you heard of the headaches of getting all your permits and inspections. And then those have resulted in some pushbacks in deliveries. I think overall – again, it’s going to be project-by-project.

In the case of I think one of the ones that got moved back was a project we have in Florida and that actually, I think will end up being – we are going to end up being better served by having that store delivered a little bit later rather than earlier. So in that instance, it’s just fine.

The others, it’s just trying to time things, as you know, quarter-by-quarter, but no issues on the construction side..

Okay. So it’s mostly permitting.

They are not citing any labor issues, finding skilled workers to build the properties?.

No. It’s – we have and although I would say again, we have got some really, really good partners in each one of these three or four markets. But that being said, clearly labor is in strong demand.

And if you are not a good GC [ph] and you miss your scheduling, that’s where you can get hurt because that labor moves on to the next project and you got to get back in line to get them back..

Great, okay.

And then I know we have talked about new supply in the past, but could you just comment maybe on California and new supply growth that you may be seeing in say, Riverside or Southern California, like San Diego?.

Yes. So I would say we are not as focused in supply in San Diego on a ground-up level as we would be in some of our larger markets where we have a larger presence. But our team has been out in California and spent a couple of weeks out there going market-by-market.

And our sense, but I am sure you can get this more detailed from some folks who may have a bigger presence in some of these markets. But our sense is in core San Francisco, you are really not seeing much at all LA County, Orange County, you are just not seeing much. You are seeing supply in San Diego and the general surrounding area.

Hard for me to measure the exact amount, but if you looked at all the markets you mentioned, San Diego just feels like it’s got a little bit more going on than the other major California markets..

Okay.

And then just one more, I realize Jacksonville is a small market, any impact from flooding from Hurricane Matthew there?.

Yes. So overall, we were incredibly fortunate in that. Thankfully we had, relative to how bad it could have been. A limited amount of damage and none of our teammates had any big issues, which is great. Most of the minor flooding that we experienced took place in the South Carolina, North Carolina markets.

I think current estimate of damage in the wholly owned portfolio is in that $50,000 to $75,000 range..

Okay, alright. Thanks guys..

The next question is from Ryan Burke at Green Street Advisors..

Thanks.

Just wanted to continue with the hurricane, but from a revenue perspective, Hurricanes have historically – or well, self-storage has historically been sort of an unfortunate beneficiary of the dislocation that is caused from hurricane damage, what are you seeing from the demand side in Florida?.

Yes. The impact, if we feel it, we will feel it more in the managed portfolio than in the owned portfolio. We have obviously a presence in Jacksonville. I would say, to-date we haven’t seen any material change there. I was just down in Daytona, in Deerfield Beach, Fort Lauderdale area and miraculously they largely escaped.

So we will get some benefit in some of the managed stores in South Carolina and Georgia. I don’t really have a flavor yet as to how significant that’s going to be..

Okay. Thanks.

And separate and last question, broadly how have rate increases to existing customers fared in past environments when rates to move-in customers have gone flat to negative and is there any reason we should expect anything different when this sort of entering this environment again, so I think should we expect anything different moving forward?.

Yes. I wouldn’t think we should expect anything different and we will use performance during the Great Recession as sort of the best example of that. We dropped rate during and after that pretty significantly. We didn’t change materially our approach to the existing customer.

And again, wouldn’t think that in an environment if in fact, your thesis is right that there is some flattening in rate that, that would have an impact on the existing customer..

Thank you..

You’re welcome..

[Operator Instructions] And your next question is from Todd Stender at Wells Fargo..

Hi. Thanks guys.

And Chris, you kind of highlighted some of the C/O deals and maybe that you are passing on a couple, assuming that others are passing on making some of the same deals, do you get a sense that these projects are still getting built, I just wanted to get a feel of how aggressive bidders – builders are getting as the lease-up is by the regions have been so extraordinarily short to see how much supply we could kind of expect from progressive build-out?.

Yes. Todd, my sense is that when they are passed over by the REITs, largely the project isn’t getting done. I don’t know whether it never gets done. But again, if you think about the economics, the reason they are getting passed over is the profit, so to speak that, that builder wants to achieve isn’t market.

And so generally speaking, they have tended to just move on. I am sure some of them get done in some other structure, but I would say, my sense would be the majority of them just aren’t getting anywhere..

That’s helpful.

And then just finally, you have been buying in Nevada, I just want to hear what markets and maybe even submarkets you are comfortable buying in?.

Yes. We have been – we found some good opportunities in Las Vegas. Again, if you think about markets that we have talked about historically, where we had a presence, but not significant enough of a presence in our mind, that was one of those. And this year we have been able to find some great opportunities.

The team has done a fabulous job there and we have been able to add four stores, both up through the end of the quarter and subsequent to the quarter in the Las Vegas market. And we are real pleased with the product we are finding and we are pleased with the transactions..

Great. Thank you..

You’re welcome..

This concludes our question-and-answer session. I would like to turn the conference back over to Chris Marr for closing remarks..

Okay. Thank you, everybody for this lengthy call. I am glad that we could address all of your questions. We look forward to seeing anyone who didn’t have a chance to ask a question here in NAREIT or on a follow-up. As I said, the consumer continues to be healthy, business continues to be good.

We are quite positive about our prospects and we will continue to focus on ways to deliver value to our shareholders. So thank you very much for your participation and look forward to speaking with many of you soon. Take care..

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect..