CUBESMART: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-K)


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 complete 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 discussion of such risk factors, see the
section in this Report entitled "Risk Factors".



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 December 31, 2020 and December 31, 2019, we owned 543
self-storage properties totaling approximately 38.5 million rentable square feet
and 523 self-storage properties totaling approximately 36.6 million rentable
square feet, respectively. As of December 31, 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 December 31, 2020, we managed 723 stores for third
parties (including 105 stores containing an aggregate of approximately 7.5
million net rentable square feet as part of five separate unconsolidated real
estate ventures), bringing the total number of stores we owned and/or managed to
1,266. As of December 31, 2020, we managed stores for third parties in the
District of Columbia and 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 maximize revenues by managing rental rates and
occupancy levels.


We typically experience seasonal fluctuations in our store occupancy rates, which are typically 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 and
moving trends, 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, 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 to focus on maximizing organic growth opportunities and the selective pursuit of targeted acquisitions and developments of self-storage properties.

We have only one industry to present: we own, operate, develop, manage and acquire self-storage properties.

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 New York, Florida,
Texas and California provided approximately 16%, 15%, 9%, and 8%, respectively,
of total revenues for the year ended December 31, 2020.



Summary of critical accounting policies and estimates

Below is a summary of the accounting policies and estimates that management considers essential in the preparation of the consolidated financial statements included in this report. Some of the accounting policies used in the preparation of these consolidated financial statements are particularly important for an understanding of the financial position and the results of operations presented in the

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historical consolidated financial statements included in this Report. A summary
of significant accounting policies is also provided in the notes to our
consolidated financial statements (see note 2 to the 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, control 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, improvements 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 the stores are acquired, the purchase price is split between the tangible and intangible assets acquired and the liabilities assumed on the basis of estimated fair values.

In allocating the purchase price 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 has been allocated to above- or below-market lease
intangibles associated with storage leases assumed at acquisition. Above- or
below- market lease intangibles associated with assumed ground leases in which
the Company serves as lessee are recorded as an adjustment to the right-of-use
asset and reflect the difference between the contractual amounts to be paid
pursuant to each in-place ground lease and management's estimate of fair market
lease rates. These amounts are amortized over the term of the lease. 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 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 years ended December
31, 2020, 2019 and 2018.



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.



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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 and are not
depreciated. There were no stores classified as held for sale as of December 31,
2020.


Investments in Non-consolidated real estate companies



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) and cash contributions, less cash
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 that is other than
temporary 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. 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 years ended December 31, 2020, 2019 and 2018.



Recent accounting positions

For a discussion of recent accounting positions affecting our activities, 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 for each period presented 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 years 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 December 31, 2020, we owned 475 same-store properties and 68 non
same-store properties. All of the non same-store properties were 2019 and 2020
acquisitions, dispositions, developed stores, stores with a significant portion
of net rentable square footage taken out of service or stores that have not yet
reached stabilization as defined above. For analytical presentation, all
percentages are calculated using the numbers presented in the financial
statements contained in this Report.



The comparability of our operating results is affected by the timing of acquisition and disposal activities during the periods presented. From
December 31, 2020, 2019 and 2018, we owned 543, 523 and 493 self-storage properties and related assets, respectively.


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The following table summarizes the change in the number of stores owned compared to
January 1, 2018 by December 31, 2020:



                          2020    2019    2018

Balance - January 1        523     493     484
Stores acquired              1       1       1
Balance - March 31         524     494     485
Stores acquired              2      21       1
Stores developed             1       2       -
Stores combined (1)          -     (1)       -
Balance - June 30          527     516     486
Stores acquired              -       2       3
Stores developed             -       1       1
Balance - September 30     527     519     490
Stores acquired             18       5       5
Stores combined (1)        (1)       -       -
Stores sold                (1)     (1)     (2)

Balance – the 31st of December 543 523 493

On May 24, 2019 and November 10, 2020, we acquired stores located in Temple,

from A to Z and Merritt Island, Florida during about $ 1.6 million and $ 3.9 million,

(1) respectively. In each case, the store acquired is located in the immediate vicinity

to an existing wholly owned store. Given their proximity to each other, each

the acquired store was combined with the existing store in our number of stores,

     as well as for operational and reporting purposes.




Comparison of the Year Ended December 31, 2020 to the Year Ended December 31,
2019 (dollars in thousands)




                                                                                                    Non Same-Store                Other/
                                                      Same-Store Property Portfolio                   Properties               Eliminations                           Total Portfolio
                                                                                        %                                                                                                         %
                                                2020          2019        Change      Change      2020         2019         2020         2019          2020           2019          Change      Change
REVENUES:
Rental income                                $  529,053    $  522,477    $ 

6,576 1.3% $ 51,956 $ 29,927 $ – $ – $ 581,009 $ 552,404 $ 28,605 5.2% Other property income

                    52,234        54,470      

(2,236) (4.1)% 6,161 3,800 12,328 9,288

70 723 67 558 3,165 4.7% Income from property management fees

                        -             -            -       0.0 %          -            -       27,445       23,953         27,445         23,953         3,492       14.6 %
Total revenues                                  581,287       576,947      

4,340 0.8% 58 117 33 727 39 773 33 241 679 177 643 915 35 262 5.5%

OPERATING EXPENSES:
Property operating expenses                     173,585       169,540      

4,045 2.4% 20,955 14,506 29,094 25,693 223,634 209,739 13,895 6.6% NET OPERATING INCOME:

                           407,702       407,407          295       0.1 %     37,162       19,221       10,679        7,548        455,543        434,176        21,367        4.9 %

Store count                                         475           475                                  68           48                                      543            523
Total square footage                             33,196        33,196                               5,348        3,408                                   38,544         36,604
Period end occupancy (1)                           93.4 %        91.2 %                              85.3 %       73.5 %                                   92.3 %         89.5 %
Period average occupancy (2)                       93.2 %        92.2 %
Realized annual rent per occupied sq. ft.
(3)                                          $    17.10    $    17.07

Depreciation and amortization                                              
                                                                            156,573        163,547       (6,974)      (4.3) %
General and administrative                                                                                                                               41,423         38,560         2,863        7.4 %
Subtotal                                                                                                                                                197,996        202,107       (4,111)      (2.0) %

OTHER (EXPENSE) INCOME
Interest:
Interest expense on loans                                                                                                                             

(75,890) (72,525) (3,365) (4.6)% Depreciation expense on loan purchases

                                                                                                                   (2,674)        (2,819)           145        5.1 %
Loss on early extinguishment of debt                                                                                                                   (18,020)              -      (18,020)          - %
Equity in earnings of real estate ventures                                                                                                                  178         11,122      (10,944)     (98.4) %
Gains from sale of real estate, net                                        
                                                                              6,710          1,508         5,202      345.0 %
Other                                                                                                                                                     (240)          1,416       (1,656)    (116.9) %
Total other expense                                                                                                                                    (89,936)       (61,298)      (28,638)     (46.7) %
NET INCOME                                                                                                                                              167,611        170,771       (3,160)      (1.9) %
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
Noncontrolling interests in the Operating
Partnership                                                                                                                                             (1,825)        (1,708)         (117)      (6.9) %
Noncontrolling interests in subsidiaries                                                                                                                  (165)             54         (219)    (405.6) %
NET INCOME ATTRIBUTABLE TO THE COMPANY'S COMMON SHAREHOLDERS                                                                                        $   

165 621 $ 169,117 $ (3,496) (2.1)%

(1) Represents occupancy at the 31st of December of the respective year.

(2) Represents the weighted average occupancy rate for the period.

(3) The annual rent realized per square foot occupied is calculated by dividing the rent

    income by the weighted average occupied square feet for the period.




Revenues



Rental income increased from $552.4 million in 2019 to $581.0 million in 2020,
an increase of $28.6 million, or 5.2%. The $6.6 million increase in same-store
rental income was due primarily to a 1.0% increase in average occupancy for
2020
compared to 2019. The

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remaining increase was primarily attributable to $22.0 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 $67.6 million in 2019 to $70.7
million in 2020, an increase of $3.2 million, or 4.7%. The $2.2 million decrease
in same-store other property related income was mainly attributable to a
decrease in fee revenue due to the impact of COVID-19. This decrease was offset
by a $2.4 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 $3.0 million increase in other property related income at
our managed stores due to an increase in stores under management (723 stores as
of December 31, 2020 compared to 649 stores as of December 31, 2019).



Income from property management commissions increased from $ 24.0 million in 2019 at $ 27.4 million in 2020, an increase of $ 3.5 million, or 14.6%. This increase is attributable to an increase in management fees related to the management activity on behalf of third parties resulting from the increase in the number of stores under management described above.



Operating Expenses



Property operating expenses increased from $209.7 million in 2019 to $223.6
million in 2020, an increase of $13.9 million, or 6.6%. The $4.0 million
increase in property operating expenses on the same-store portfolio was
primarily due to increases in property taxes and advertising costs of $2.1
million and $3.8 million, respectively, offset by decreases in personnel and
maintenance costs of $1.6 million and $0.4 million, respectively. The remainder
of the increase was attributable to $6.4 million of increased expenses
associated with newly acquired or developed stores and $3.4 million of increased
expenses associated with the growth in our third-party management program.



Depreciation and amortization decreased from $163.5 million in 2019 to $156.6
million in 2020, a decrease of $7.0 million, or 4.3%. This decrease is primarily
attributable to fully depreciated and amortized assets associated with
acquisitions in prior years.



General and administrative expenses increased by $ 38.6 million in 2019 at
$ 41.4 million in 2020, an increase of $ 2.9 million or 7.4%. The change is mainly due to the increase in personnel costs resulting from the increase in headcount to support our growth.


Other (expense) income



Interest expense increased from $72.5 million in 2019 to $75.9 million in 2020,
an increase of $3.4 million, or 4.6%. The increase was attributable to a higher
amount of outstanding debt during 2020 compared to 2019. The average outstanding
debt balance increased $182.1 million to $2,036.5 million during 2020 as
compared to $1,854.4 million during 2019 as the result of borrowings to fund a
portion of our growth. The weighted average effective interest rate on our
outstanding debt for 2020 and 2019 was 3.82% and 4.06%, respectively.



The loss on early extinguishment of the debt was $ 18.0 million in 2020, which was linked to the early repayment of $ 250.0 million 4.800% Senior Bonds due 2022 (the “2022 Bonds”), with no comparable amount in 2019. See Liquidity and Capital Resources below.

Equity in earnings of real estate ventures decreased from $11.1 million in 2019
to $0.2 million in 2020. The change was mainly driven by a prior year gain
attributable to HVP III, a real estate venture in which we previously owned a
10% interest. Our $10.7 million share of the gain was recorded in connection
with HVP III's sale of 50 properties during 2019.



Gains from sale of real estate, net were $6.7 million in 2020 compared to $1.5
million in 2019, an increase of $5.2 million. These gains are determined on a
transactional basis and, accordingly, are not comparable across reporting
periods.



The component of other (expense) income designated as other decreased from the income of $ 1.4 million in 2019 at the expense of $ 0.2 million in 2020, mainly due to fees collected in 2019 in connection with the sale of 50 properties by HVP III.

Comparison of the completed year December 31, 2019 at the end of the year December 31, 2018



Refer to the section entitled "Results of Operations" within Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of our   Annual Report on Form 10-K for the year ended December 31,
2019   for a comparison of the year ended December 31, 2019 to the year ended
December 31, 2018.





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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.



We believe that the NOI is useful for investors to assess our operational performance because:

this is one of the main metrics used by our management and store managers

? assess the economic productivity of our stores, including our ability to

rent our stores, increase prices and occupancy and control our property

   operating expenses;



it is widely used in real estate industry and self-storage industry for

measure the performance and value of real estate assets without taking into account

? various items included in net income that do not relate 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 compare the results of our operations in a meaningful way

? performance from one period to another by removing the impact of our capital

structure (mainly interest expense on our outstanding debt) 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, 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.



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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 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 to FFOs and FFOs, as adjusted, for the years ended. December 31, 2020 and 2019:



                                                                   For the year ended December 31,
                                                                     2020                  2019

Net income attributable to common shareholders of the Company $ 165,621 $ 169,117

Add (deduct):
Real estate depreciation and amortization:
Real property                                                           152,897                160,485
Company's share of unconsolidated real estate ventures                    7,430                  7,052
Gains from sale of real estate, net (1)                                 (6,710)               (12,175)
Noncontrolling interests in the Operating Partnership                     1,825                  1,708

FFO attributable to ordinary shareholders and PO unit holders $ 321,063 $ 326,187

Add:

Loss on early extinguishment of debt (2)                                 18,020                    141

FFO, as adjusted, attributable to common shareholders and PO unitholders

                                                     $       

$ 339,083 $ 326,328

Weighted average diluted shares outstanding                             194,943                191,576
Weighted average diluted units outstanding                                2,137                  1,886
Weighted average diluted shares and units outstanding                   197,080                193,462



The year has ended December 31, 2019 understand $ 10.7 million gains from the sale of

(1) real estate, net which are included in the share of the Company’s equity in

     earnings of real estate ventures.



For the year ended December 31, 2020, loss on early extinguishment of debt

(2) relates to a $ 17.6 million early redemption premium and a $ 0.4 million write off

acquisition costs of unamortized loans associated with operations

Repurchase by the general partnership of its 2022 Notes on October 30, 2020.




Cash Flows



Comparison of the completed year December 31, 2020 at the end of the year December 31, 2019

A comparison of cash flows from operating, investing and financing activities for the years ended December 31, 2020 and 2019 is:




                                      For the year ended December 31,
Net cash provided by (used in):          2020                 2019         
  Change

                                                      (in thousands)

Operating activities               $        351,033     $        331,768    $    19,265
Investing activities               $      (511,441)     $      (375,664)    $ (135,777)
Financing activities               $        108,196     $         95,855    $    12,341



Cash provided by operating activities for the years ended December 31, 2020 and
2019 was $351.0 million and $331.8 million, respectively, reflecting an increase
of $19.3 million. Our increased cash flow from operating activities was
primarily attributable to stores

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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 (723 stores as of December 31, 2020 compared to 649 stores
as
of December 31, 2019).



Cash used in investing activities increased from $375.7 million for the year
ended December 31, 2019 to $511.4 million for the year ended December 31, 2020,
an increase of $135.8 million. The change was primarily driven by an increase in
cash used for acquisitions of storage properties. Cash used during the year
ended December 31, 2020 included the acquisition of 21 stores and land for an
aggregate net purchase price of $415.9 million, net of $154.4 million of assumed
debt and $175.1 million of OP units issued. Including the acquisition of the
remaining interest in HVP III, a previously unconsolidated real estate venture,
cash used during the year ended December 31, 2019 related to the acquisition of
29 stores for an aggregate net purchase price of $238.3 million, net of $3.6
million of OP units issued. Additionally, there was a $47.5 million decrease in
development costs from the year ended December 31, 2019 compared to the year
ended December 31, 2020 resulting from the payment of put liabilities associated
with three previously consolidated development joint ventures during the 2019
period.


Cash provided by financing activities increased from $95.9 million for the year
ended December 31, 2019 to $108.2 million for the year ended December 31, 2020,
an increase of $12.3 million. During the years ended December 31, 2020 and 2019,
we received net proceeds from unsecured senior notes of $445.8 million and
$696.4 million, respectively, reflecting a decrease of $250.6 million that was
primarily due to the timing and size of each offering. During the year ended
December 31, 2020, we made principal payments on our 2022 Notes of $250.0
million with no comparable payments during 2019, and, additionally, there was a
decrease of $75.6 million in proceeds received from the issuance of common
shares during 2020 compared to 2019, due to fewer common shares sold under our
at-the-market equity program in 2020 compared to 2019. During the year ended
December 31, 2020, we also made principal payments on mortgage loans of $46.1
million compared to $11.7 million during the year ended December 31, 2019,
reflecting an increase of $34.4 million that is primarily attributable to the
repayment of three mortgage loans during 2020. These reductions in cash provided
by financing activities were offset by a $200.0 million cash payment made to
repay our unsecured term loan in January 2019 with no comparable payment in
2020. In addition, net borrowings on the revolving credit facility were $117.8
million during the year ended December 31, 2020 compared to net payments of
$299.5 million during the year ended December 31, 2019.



Comparison of the completed year December 31, 2019 at the end of the year December 31, 2018

See the section titled “Cash Flows” in Heading 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our

Annual report on Form 10-K for the year ended December 31, 2019 for a comparison of the year ended December 31, 2019 at the end of the year December 31, 2018.

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 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 will
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 and 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. In the 2021 fiscal year, we
expect recurring capital expenditures to be approximately $11.0 million to $16.0
million, planned capital improvements and store upgrades to be approximately
$10.5 million to $15.5 million and costs associated with the development of new
stores to be approximately $34.0 million to $49.0 million. Our currently
scheduled principal payments on debt are approximately $46.4 million in 2021.



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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 Revolver 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 2021 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 Revolver, 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
long-term 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.



From December 31, 2020, we had about $ 3.6 million in available cash and cash equivalents. In addition, we had approximately $ 631.6 million availability for borrowings under the revolving portion of our Amended and Restated Credit Facility (defined below).


Unsecured Senior Notes


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% at maturity. Net proceeds from the offering
were used to repay, in full, $250.0 million of outstanding 4.800% senior notes
due in July 2022. The remaining proceeds from the offering were used to repay
all of the outstanding indebtedness under the revolving portion of our Credit
Facility (defined below) and for working capital and other general corporate
purposes.



Our unsecured senior notes are summarized as follows (collectively referred to
as the "Senior Notes"):




                                             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         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
$450M 2.000% Guaranteed Notes due
2031                                       450,000              -         2.10  %           Oct-20     Feb-31
Principal balance outstanding            2,050,000      1,850,000
Less: Discount on issuance of
unsecured senior notes, net                (7,470)        (3,860)

Less: Costs of obtaining loans, net (12,158) (10,415) Total senior unsecured notes, net $ 2,030,372 $ 1,835,725

On October 30, 2020, the Operating partnership repurchased, in full, on 2022

Notes, with the product of his $ 450.0 million 2,000% senior bonds maturing in 2031

published on October 6, 2020. As part of the 2022 buyout

(1) Notes, the Operating partnership recognized an anticipated debt loss

extinction of $ 18.0 million, whose $ 17.6 million represents a

early redemption premium and $ 0.4 represents the write-off of an unamortized loan

     procurement costs.



On April 4, 2017, the Operating partnership Posted $ 50.0 million of his

4.375% senior bonds due 2023, which are part of the same series as the $ 250.0

(2) millions in principal of Operating partnership 4.375% Senior Notes

payable December 15, 2023 published on December 17, 2013. the $ 50.0 million and

     $250.0 million tranches were priced at 105.040% and 98.995%, respectively, of


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the principal amount for a yield of 3.495% and 4.501%, respectively, to maturity. the

The combined weighted average effective interest rate of the 2023 Notes is 4.330%.



     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 in principal of the Operating partnership 4.000% senior notes

(3) due November 15, 2025 published on October 26, 2015. the $ 50.0 million and

$ 250.0 million tranches were valued respectively at 101.343% and 99.735% of

the principal amount for a return of 3.811% and 4.032%, respectively, to maturity.

The combined weighted average effective interest rate on the 2025 Notes is

     3.994%.




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 and for the year ended December 31,
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 $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 credit 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 our 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.



As of December 31, 2020, borrowings under the Revolver had an effective weighted
average interest rate of 1.24%. Additionally, as of December 31, 2020, $631.6
million was available for borrowing under the Revolver. The available balance
under the Revolver is reduced by an outstanding letter of credit of $0.6
million.



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
and for the year ended December 31, 2020, the Operating Partnership was in
compliance with all of its 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



Issuance of Common Shares



We maintain an at-the-market equity program that enables us to offer and sell up
to 60.0 million common shares through sales agents pursuant to equity
distribution agreements (the "Equity Distribution Agreements"). Our sales
activity under the program for the years ended December 31, 2020, 2019 and
2018
is summarized below:


                                                                    For the year ended December 31,
                                                          2020                        2019                   2018

                                                      (dollars and shares in thousands, except per share amounts)
Number of shares sold                                             3,627                       5,899               4,291
Average sales price per share                    $                33.69      $                33.64    $          31.09
Net proceeds after deducting offering costs      $              120,727    
 $              196,304    $        131,835


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We used proceeds from sales of common shares under the program during the years
ended December 31, 2020, 2019 and 2018 to fund acquisitions of storage
properties and for general corporate purposes. As of December 31, 2020, 2019 and
2018, 10.9 million common shares, 4.6 million common shares and 10.5 million
common shares, respectively, remained available for issuance under the Equity
Distribution Agreements.


Other significant changes in financial position



                                                         December 31,
                                                   2020              2019           Change
                                                                (in thousands)
Selected Assets
Storage properties, net                         $ 4,505,814    $      3,774,485    $ 731,329
Other assets, net                                   170,753             101,443       69,310

Selected Liabilities
Unsecured senior notes, net                     $ 2,030,372    $      1,835,725    $ 194,647
Revolving credit facility                           117,800                   -      117,800
Mortgage loans and notes payable, net               216,504              96,040      120,464
Lease liabilities - finance leases                   65,599                

– 65,599

Noncontrolling interests in the Operating
Partnership                                     $   249,414    $         62,088    $ 187,326



Storage properties, increased net $ 731.3 million of December 31, 2019 To
December 31, 2020, primarily due to the acquisition of 21 storage properties, additions and improvements to storage properties and development costs incurred during the year.



Other assets, net increased $69.3 million from December 31, 2019 to December 31,
2020, primarily due to the value assigned to the in-place leases at the 21
storage properties acquired during the year and the right-of-use asset
associated with the assumption of a ground lease in connection with the
acquisition of the Storage Deluxe Assets that was classified as an operating
lease.


Unsecured senior notes, net increased $194.6 million from December 31, 2019 to
December 31, 2020 as a result of the issuance of the 2031 Notes on October 6,
2020 offset by the redemption of the 2022 Notes on October 30, 2020.



Revolving credit facility increased $117.8 million from December 31, 2019 to
December 31, 2020 primarily as a result of borrowings used to fund the
acquisitions of 21 storage properties, additions and improvements to storage
properties, and development costs incurred during the year.



Mortgage loans and notes payable, net increased $120.5 million from December 31,
2019 to December 31, 2020 primarily due to the assumption of six mortgage loans,
one of which was repaid immediately upon assumption, in connection with the
acquisition of a portfolio of eight stores located in the outer boroughs of New
York City (the "Storage Deluxe Assets").



Rental debts – finance leases increased $ 65.6 million of December 31, 2019 To December 31, 2020 due to the assumption of two land leases in connection with the acquisition of the Storage Deluxe Assets.



Noncontrolling interests in the Operating Partnership increased $187.3 million
from December 31, 2019 to December 31, 2020, primarily due to the issuance of OP
Units in connection with the acquisition of the Storage Deluxe Assets and the
acquisition of the noncontrolling interest in a joint venture that developed a
store located in Brooklyn, NY.



Off-balance sheet provisions



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.

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