CubeSmart (CUBE) Q4 2020 Earnings Call Transcript

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CubeSmart (CUBE -0.83%)
Q4 2020 Earnings Call
Feb 26, 2021, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and welcome to the CubeSmart Fourth Quarter 2020 Earnings Call. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. I would now like to turn the conference over to Josh Schutzer, Senior Director of Finance. Please go ahead.

Josh Schutzer -- Senior Director, Finance

Thank you, Grant. Good morning, everyone. Welcome to CubeSmart's fourth quarter 2020 earnings call. Participants on today's call 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 these 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 coupled 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. The reconciliation between GAAP and non-GAAP measures can be found in the fourth quarter financial supplement posted on the Company's website at www.cubesmart.com.

I will now turn the call over to Chris.

Christopher P. Marr -- President and Chief Executive Officer

Thanks, Josh. Good morning. I'll begin by recognizing and thanking our over 3,000 CubeSmart teammates across the country who have worked tirelessly and passionately during the past 12 months as the pandemic has altered our business and our lives in so many challenging and difficult ways.

Our team has innovated and adapted as our traditional means of operating often changed overnight. Throughout, we maintained our focus on delivering outstanding customer service with genuine care. Our focus and our investment in the highest quality assets, balance sheet and platform continued to pay dividends in 2020, as evidenced by our solid same-store revenue and NOI growth, in spite of a first half of the year that began with headwinds from new supply and then a very difficult operating environment in the second quarter.

The fourth quarter continued the momentum from our very strong third quarter performance and our state-of-the-art systems, balanced price and occupancy and our results in a volatile year proved out our flexibility in a rapidly changing environment. Looking at our performance across our markets, we experienced broad-based demand and strength in pricing across our entire diversified portfolio.

We had similar solid growth in both our urban and our suburban stores. The New York MSA inclusive of the outer boroughs, the rest of the SLA corridor and our Arizona, Nevada and California properties were particularly strong performers. Positive results were a bit more muted in the Southeast and Texas as there remains a bit of a supply overhang. But overall, we had strong performance across the board. Our investment team was extremely busy during the quarter as we successfully leveraged our relationships and closed on attractive transactions in our core markets.

Our results were headlined by the Storage Deluxe transaction, but we also closed on an additional ten stores across five states, furthering our strategy of maintaining a high-quality diversified portfolio. We continue to be a third-party manager of choice, adding over 150 stores to the platform for the fourth consecutive year. We are entering the stage of the development cycle where many of our owners whose stores opened particularly in 2017 and '18 are ready to monetize their assets and we expect a degree of churn in the managed portfolio this year.

During 2020, in addition to enhancing our quality platform and quality portfolio, we continued to enhance our quality balance sheet, attractively raising capital and utilizing our joint ventures to provide us capacity as we look to the future. The positive trends from our fourth quarter continued thus far into '21 and we expect a constructive operating environment this year as evidenced by our earnings guidance.

I will now turn the call over to Tim, who will provide more details on our fourth quarter and full year performance and our 2021 outlook. Tim?

Timothy M. Martin -- Chief Financial Officer

Thanks, Chris, and thank you to everyone on the call for your continued interest and support. As Chris touched on, the fourth quarter was a very productive quarter for us in many ways. Consumer demand for self-storage continued to be unseasonably strong into the fourth quarter, and our platform portfolio continued to perform exceptionally well.

Same-store performance included headline results of 3.4% revenue growth and negative 0.8% expense growth yielding NOI growth of 5.1% for the quarter. Average occupancy in the fourth quarter was 93.8%, up 220 basis points year over year and quarter ending occupancy was also up 220 basis points over last year at 93.4%.

Same-store expense growth for the fourth quarter came in a little better than our expectations, down 0.8% year over year. We have a constant focus on appealing and challenging assessed values that drive our real estate taxes and we benefited from a few successful real estate tax appeals in the quarter, which is certainly a welcome news in a line item that has seen plenty of growth in recent years.

We also experienced strong performance across our non-same-store portfolio and our third-party management business during the quarter. Combining all of that internal growth along with external growth, we reported FFO per share as adjusted of $0.47 for the quarter, representing an 11.9% growth over last year. We remain active and disciplined in our pursuit of external growth opportunities and the fourth quarter was a very busy quarter for our team on that front.

During the fourth quarter, we invested $661.2 million as we acquired 18 stores across five states. This total includes our previously announced transaction of Storage Deluxe in New York, which closed in December. During the quarter, we also completed the sale of one store in New York for a total sales price of $12.8 million. On the third-party management front, we finished off another productive year adding 38 stores in the fourth quarter bringing our 2020 total to 168 new stores, added to our program. We ended the year with 723 managed stores, allowing us to enhance our market position and expand the CubeSmart brand. On the balance sheet, we continue to focus on funding our growth in a conservative manner consistent with our BBB Baa2 investment grade credit ratings and as you'd expect with the levels of external growth I just walked through, we were quite busy during the quarter on the capital raising front.

On October 6th, we closed on a $450 million unsecured bond issue with a long 10-year term maturing in 2031 with a yield to maturity of 2.1%. This offering demonstrates our ongoing commitment to this market and represents our seventh bond offering. Proceeds from the bond deal were partially opportunistic from a refinancing perspective and partially to fund external growth.

On the opportunistic side, we used proceeds to support the redemption of our debut $250 million bond deal from back in 2012, that had a coupon of 4.8%. That redemption was completed on October 30th and included an $18 million charge. The balance of the proceeds provided funding for a portion of the external growth we've talked about. As part of the Storage Deluxe portfolio acquisition, we assumed $154.4 million of secured debt, of which $33.2 million of that was repaid at closing, or post closing rather. We were also active during the fourth quarter raising equity capital. As part of that Storage Deluxe transaction, we issued operating partnership units valued at a $175.1 million for an average price of $33.21 per unit.

Additionally, we were busy utilizing our at-the-market equity program as we sold 3.6 million common shares at an average price of $33.69 per share, raising net proceeds of $120.7 million. So that's a lot of moving pieces. Obviously, all of these details included in our supplemental package that we released last evening, but importantly, it all adds up to us being in a great position from a balance sheet perspective entering 2021.

We funded the meaningful growth we experienced at the tail end of 2020 and we're prepared to be opportunistic in 2021, if we can identify attractive opportunities that allow us to continue to execute on our disciplined growth strategy. In December, we announced a 3% increase to our quarterly dividend, bringing our dividend to $1.36 per share on an annualized basis, and based on the midpoint of our 2021 guidance, the increased dividend suggests an FFO payout ratio of 75.6%.

Speaking of guidance, details of our 2021 earnings guidance and related assumptions were included in our release last night. Our 2021 same-store property pool increased by 36 stores. Consistent with prior years, our forecasts are based on a detailed asset-by-asset ground-up approach, and consider the impact at the store level if any of competitive new supply delivered in 2019 and 2020 as well as the impact of 2021 deliveries that will compete with our stores.

Embedded in our same-store expectations for 2021 is the impact of new supply that will compete with approximately 40% of our same-store portfolio. So from a trend line perspective, you'll recall back in 2017, we had 25% of same-stores impacted by supply, that grew to 40% in 2018, then grew again to 50% in 2019. We then started to see the impact decline as impacted stores fell down to 45% in 2020 and now again in 2020, we see that number come back further down to 40%. So we're continuing to see signs of a lessening impact from new supply as we move forward.

Our newly developed stores and acquired stores in lease-up, continue to make really solid progress from an occupancy standpoint. We believe our development pipeline and non-stabilized store acquisitions will create meaningful NAV accretion and stabilization. But of course, in the short term, those investments create a drag to our FFO per share. Our FFO guidance for 2021 is impacted negatively by $0.05 per share to $0.06 per share as a result of that dilution.

You will note that the dilution in 2021 though is down about $0.02 per share compared to 2020 as the stores are continuing to lease-up and less has been added to our development pipeline. Our FFO guidance does not include the impact of any speculative acquisition or disposition activity as levels of activity and timing are difficult to predict.

So we're certainly glad to report 2020 results and bring a close to 2020. We're quite proud of our team's accomplishments during a year that provided so many challenges. I believe these challenges gave us the ability to demonstrate the strength of our team, our systems, our platform, our portfolio quality, and our ability to be nimble and react quickly and efficiently in a changing environment. That said, it's nice to reinstate earnings guidance, have increased visibility, and again nice to close out 2020 and move on to a new and promising year in 2021.

So with that, thanks again for joining us on the call this morning. At this time, operator, let's open up the call for some questions.

Questions and Answers:

Operator

We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Alua Askarbek with Bank of America. Please go ahead.

Alua Askarbek -- Bank of America Merrill Lynch -- Analyst

Good morning. Congratulations on a great and active quarter. So I just wanted to kind of talk a little bit more about your opportunistic commentary for 2021. Given what is going on and your strong balance sheet, it seems like your acquisition guidance is a little bit low. Is that just mainly what you guys are thinking is currently in the pipeline? Just how are you guys thinking about the guidance there?

Timothy M. Martin -- Chief Financial Officer

Yeah. So, a great question, and thank you for the compliment on the strong quarter. That is much appreciated. It's a difficult year to predict ultimately where we think we're going to be a participant and some of the activity we certainly see that there's a lot of stuff that we believe will come to market.

But it's competitive, cap rates are aggressive, there are a lot of people that are bidding on assets that come to market. So at the range that we provided and looking at past experience, it would appear to be a little bit low. I think we feel confident that by looking at our third party managed platform, thinking about our existing relationships, we feel pretty comfortable that we'll be able to transact in that level and find attractive opportunities.

Beyond that, certainly we'll be opportunistic if and when we find opportunities that are attractive to us. But visibility into ultimately where we will fit into certainly on broker transactions is a little bit cloudy as we sit here today.

Alua Askarbek -- Bank of America Merrill Lynch -- Analyst

Got it, OK. And then, I guess just a little bit more on the development. I know development starts have been trending down, but do you think that there is any opportunity to start something new this year?

Christopher P. Marr -- President and Chief Executive Officer

Hey, there. It's Chris. So we put a few more specifically Vienna, Virginia in the pipeline now. So we are looking again in the markets that we focus in on that Boston to Washington DC Corridor for opportunities and we will be selectively adding, I think for those markets in general, where our portfolio sits, we're looking for unique opportunities to be able to enhance the stores that we own and operate today that are in underserved pockets or pockets where we think we can take advantage of demand and a low square foot per capita. Those are becoming increasingly more challenging to find at this stage of the cycle. So it isn't off the table, but I would say we -- in all likelihood will see a little bit less activity in that area than we would have seen at the beginning of the cycle.

Alua Askarbek -- Bank of America Merrill Lynch -- Analyst

Okay, got it. Thank you.

Christopher P. Marr -- President and Chief Executive Officer

Thanks.

Operator

Thanks. Our next question will come from Juan Sanabria with BMO Capital Markets. Please go ahead.

Juan Sanabria -- BMO Capital Markets -- Analyst

Hi, good morning. Hoping you guys could speak a little bit to the guidance assumptions first half versus second half. I don't know if you could provide where spot occupancy is relative to the last year, and any color on how rates have trended, I guess through the fourth and early into the first would be helpful.

Timothy M. Martin -- Chief Financial Officer

Sure, happy to. So I'll start with thinking about how we see things playing out in 2021. Certainly, as we enter the year, we are doing so at occupancy levels that are seasonably high. And so we would expect that first-half performance certainly relative to first half performance in 2020 is going to be -- is going to continue to be a pretty robust as we saw in the fourth quarter, second quarter obviously being the quarter that is going to have the easiest comp for us and more broadly in the sector given that was the height of the impact from the pandemic.

And then when you get into the back half of the year, what we expect is as a start to a return to normal, return to normal levels of demand and normal levels of seasonality as we get in the back half of the year. And so, once we get to the back half, and in particular, into the fourth quarter of 2021, certainly from an occupancy standpoint, we're going to have a pretty difficult comp as the quarter that we're reporting on today again had a very, very strong occupancy levels and we just saw demand, that came to us in a different part of the year than it more typically does.

So that's broadly how we think about as we sit here today, how we think about how 2021 plays out. Chris, I don't know if you had anything to add on any color on rates or demand or supplement anything that I just walked through.

Christopher P. Marr -- President and Chief Executive Officer

Yeah, thanks Tim. So, Juan, as we sit here today, the same-store pool is 270 basis points higher than today last year in physical occupancy, we continue to see great opportunity on the rate side, widespread and broad and deep across the country. We're starting to push on average across the country up into the 20% year-over-year type growth range for net effective rents for new customers. So really optimistic and as Tim described, Q1, Q2, are going to have their unique year-over-year comparisons, obviously Q1 last year for the most part was relatively, quote normal, although impacted by supply. And then as you move into Q2, obviously it was a very, very challenging quarter for everyone last year. So the comp there is going to be unusual. And then underpinning our thesis today for the back end of the year, July through December is that gradual slow return to sort of a more normal process. So hopefully that's helpful.

Juan Sanabria -- BMO Capital Markets -- Analyst

Got it. Thank you. And one more for Chris, if you don't mind. You kind of alluded to maybe some attrition in the third-party management business. Any more color there of the potential quantum, do you still expect that business in terms of the number of stores managed to grow in '21 or maybe more flat, any guidance would be helpful color.

Christopher P. Marr -- President and Chief Executive Officer

Sure. So we do expect that business to grow in '21. The pipeline remains very healthy and we've got a lot of optimistic outlook on the additions to the platform. The question is just going to be, as I alluded to, and we saw a little bit of this in the fourth quarter, I think we had eight or nine assets that were bought by -- well, nine, that were bought by CUBE out of that program, eight in the Deluxe deal and one additional. We had another group where owners took the assets to market and the buyer was not CUBE and the buyer self manages. So I think you're just going to see some monetization of those assets, particularly those that are starting to get closer to stabilization.

Again, I think the tailwind for all of us coming out of '20 is the fact that physical lease-up on the assets that were not stable entering '20 certainly also benefited from high levels of demand. So occupancies have moved up pretty nicely. I think that's going to help the stores that are competing against those new stores, but the other side of that is, it's going to provide some owners an impetus to bringing stores to the market. We're not, as Tim said, we're pretty diligent in our underwriting and in what fits into our portfolio. So we will not always be the buyer for those stores.

But if we are -- we aren't they still come out of the third-party numbers. So I think we will be again to summarize long-winded answer net positive in '21, continues to be really good pipeline, but I think we'll just continue to see some of the developed assets being brought to market.

Juan Sanabria -- BMO Capital Markets -- Analyst

Thanks a lot, Chris.

Operator

Our next question will come from Todd Thomas with KeyBanc Capital Markets. Please go ahead.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Hi, good morning. Chris, the 20% higher net effective rents that you're experiencing across the portfolio as the peak leasing season gets started here in the next few weeks, do you anticipate being able to raise street rates further and similar to what you would normally do seasonally as demand potentially picks up a little bit or do you think that there are some pressure points with renters or other reasons that might hold CUBE and/or the industry back from raising rents further?

Christopher P. Marr -- President and Chief Executive Officer

Hey Todd. Good morning. The anticipation as we sit here on the 26th of February at the occupancies that we're at, we're trying to -- we're keenly focused on that balance between occupancy and rate. We do believe that there is an opportunity for a more traditional busy season within the industry that will create the typical demand of movement. I think what's going on in the housing market is a positive for the industry, the self-storage industry, we have the unique opportunity here, where you've got folks who are selling their home because the market is very positive for that, there are challenges in the homebuilding industry with materials and labor. So again, that typical use in the summer where you have someone sell their home, the new home is not ready yet, and they need to use our products. So I think that's going to be a positive factor for us.

So again, long-winded today. But the answer is, we're focused on, not renting today at too low of a rate and filling up, because we do think we're going to have an opportunity to gain additional customers over the late spring and summer and likely at a higher rate.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Okay. And then I guess, circling back to the guidance and following up on Juan's question, does the guidance contemplate lower year-over-year occupancy in the third and fourth quarters of '21 and what are you anticipating in terms of net effective rates in the back half of the year?

Christopher P. Marr -- President and Chief Executive Officer

Yeah, great question, and a question that we don't guide to specifically. So directionally, as we mentioned and the color within the range of our expectations is that as things return to a more normal seasonal trend line, as we get into the back half of the year, that would imply that we would expect occupancy levels in the back half of the year if they return to more normal seasonality, certainly about how we [Phonetic] get to the fourth quarter, we would think that occupancy levels in 2021 at this point are probably more likely to be a little bit lower in the fourth quarter of '21 than they were in '20. But we embedded in our guidance, we don't provide specific guidance on the components, be it occupancy or rate. So...

Todd Thomas -- KeyBanc Capital Markets -- Analyst

What about New York relative to the overall portfolio same-store assumptions that are underlying guidance, how are you underwriting, New York. Can you comment on that?

Christopher P. Marr -- President and Chief Executive Officer

Yeah, very similar to the rest. [Speech Overlap] The stores that in the markets that are kind of closer to Manhattan, and our Manhattan store are performing very consistent with the stores in the boroughs that are a little bit further away from Manhattan. We also obviously have not only in New York but in Washington DC, Boston, Philadelphia, a significant amount of exposure in the outer lying suburbs, so we're benefiting there as well from movement.

So I think, again, New York, Washington DC, Boston, Philadelphia will all continue to perform -- entire quarter [Phonetic] there we'll continue to perform pretty consistently with the rest of the overall portfolio in '21.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Okay. And just one last one on, you mentioned the physical occupancy was higher by 270 basis points year over year today. Is there any difference -- is there any meaningful difference at all between physical and economic occupancy today relative to where it normally is? I understand there is still some regulation in place in maybe New York and some other locations around auctioning off units. I was just curious if you could talk about that and sort of the non-paying occupancy that you have in the portfolio today.

Timothy M. Martin -- Chief Financial Officer

Yeah. I will say much like there is no real meaningful difference right in line with where it has been historically. One of the -- you know, again, one of the things that is shining about the industry as it has often done in varying cycles, our customer base is extremely solid right now. We have historically low receivables, we have historically low write-offs. So we aren't seeing -- we aren't seeing any -- actually seeing a positive change much like we did during the recession. And I think it goes to the fact that we are again a need-based product for folks who are in transition and they value what they have placed in our care and they have been paying us on time. The downside to that unfortunately for us is we have less and less folks paying late and as a result, as you can see in the disclosure, the other income is flattish, which is largely due to lower late fees than we would have experienced in the past.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Right. Okay, all right, great. Thank you.

Christopher P. Marr -- President and Chief Executive Officer

Thanks, Todd.

Operator

Next question will come from Ki Bin Kim with Truist. Please go ahead.

Ki Bin Kim -- Truist Financial -- Analyst

Thanks. Good morning. So in your view, when you look at the demand and stuff that you've seen across our portfolio, has the nature of that demand any different in New York City than other cities?

Timothy M. Martin -- Chief Financial Officer

No, we try -- we continue to look at that. Is it a little bit different at our one store on 55th Street in Manhattan? Likely. However, the unit mix there is one that is really, really skewed toward the smaller units. So if you're a customer of ours there, you're more likely than not storing the contents of your entire apartment. So when we dig into that question and look for trends, we really don't see anything different in the New York stores that are Park-Slope those closer to Manhattan, Long Island City Queens for example than we do in some of the stores out in Astoria or Coney Island and nor do we see a significant difference from the North Jersey Long Island and Westchester portfolios.

Ki Bin Kim -- Truist Financial -- Analyst

Okay. And maybe you already answered this question, but as the country continues to return back to normalcy, I'm curious on your thoughts on New York City's return to normalcy, and how that might look different, part of that's because of the net migration issues that I think people are concerned about. Just curious about your overall thoughts there.

Christopher P. Marr -- President and Chief Executive Officer

Yeah. We're bullish on the return. I think it's going to create some good demand for us. You have folks who want to either return or move into the workplace for the first time. You think about all of the folks who graduated from college or got their MBAs last spring and have yet to be able to return or enter the workforce in the physical location they thought they were going to.

As entertainment and shopping and dining reopens, all of that change, I think is going to be a net positive. I think we're also going to find that, again, the work-from-home phenomena is not changing. And so perhaps, you go back into the office four days a week or one day a week, but I don't think everybody assumes you're going back in five days a week from 9 to 5.

So the space you needed to create, to have work-from-home is going to continue to be used, and the customer is going to continue to be sticky in our opinion. So, I think we are well situated within our -- all of our urban top ten MSA portfolios, because, as I noted before we not only have stores in the urban core, but we also have a fairly concentrated position in the first and second rings around in the near and suburbs and I think that balance is going to serve us quite well.

Ki Bin Kim -- Truist Financial -- Analyst

Okay. Thank you.

Christopher P. Marr -- President and Chief Executive Officer

Thanks.

Operator

Our next question will come from Smedes Rose with Citi. Please go ahead.

Smedes Rose -- Citi -- Analyst

Hi, thank you. Just keeping with New York for a moment. I just wanted to ask you a little bit on the supply side, have you started to see anything actually start to drop out of the pipeline, given some of the changes in the tax laws that happened last year?

Christopher P. Marr -- President and Chief Executive Officer

Hey Smedes, it's Chris. Yeah, we've seen a combination of nothing new, and a few drops. So for example, this year, there was zero new supply in the Bronx. We expect next year one new store at most. Overall, we think we'll see a few more stores come in that again either were supposed to open in November and December of '20 that moved into '21 or a few stores that were on the docket pre [Technical Issues] is in Queens and Brooklyn. But as we get through '21, our expectation and what we're seeing out there is that new supply in the boroughs drops to next to nothing.

Smedes Rose -- Citi -- Analyst

Okay, thanks. And then I just wanted to ask you -- you talked about your acquisitions outlook a little bit. But it does seem like there's sort of a more pronounced number of properties coming to market, some have cited potential changes in the tax law that may be -- folks, but just wondering are you seeing a breakdown between the properties that are still in lease-up versus stabilized that the spread is becoming maybe wider than it would have been or anything along those lines that may present opportunities for you, if you're willing to kind of push through I guess remaining lease-up time.

Christopher P. Marr -- President and Chief Executive Officer

I don't think there's really a lot of changes as to what we've seen recently in the market versus what we've seen over the past 12 months as it relates to the mixture between stable and non-stable or any different view on how we would think about underwriting the risk that comes with lease-up. I do think that part of what we're going to experience here over the next 12 months is because of the strong fundamentals that we've seen over these past six months in particular, we end up talking a lot of on calls and in meetings about same-store performance. I think what we've seen across our portfolio, both owned and managed is things that are in lease-up have certainly accelerated the pace at which they're gaining physical occupancy.

And so if you think about the peak of the supply here this last development cycle being about three years ago, those stores now because of the demand that we've seen over these last couple of quarters have probably gotten to a point from an occupancy standpoint that if the owner is not a long-term owner when combining where they are from a physical occupancy standpoint where they are from the standpoint of rates have seen a nice push here along with a pretty constructive environment for them to bring their store to market, I do think you'll see a lot of those opportunities.

But again, those are going to be things that are near stable, they might not be fully stabilized, but they are getting pretty close to stabilization. So it's just going to be a really interesting year to think about how people look at all of those variables in their underwriting and how people look at their cost of capital and how they think about bidding on the other side of that transaction.

Smedes Rose -- Citi -- Analyst

Okay, thank you. Appreciate it.

Christopher P. Marr -- President and Chief Executive Officer

Thank you.

Operator

And next question will come from Todd Stender with Wells Fargo. Please go ahead.

Todd Stender -- Wells Fargo Securities LLC. -- Analyst

Hi, thanks and thanks for your comments in New York City. Just to stay in that theme New York City rents are the highest in your portfolio by far. Can you share what your revenue management systems are saying about the boroughs, have you experienced any friction in raising rents? And now you're getting them toward $30 rents. Any color there I guess on the rate side?

Timothy M. Martin -- Chief Financial Officer

Hey Todd. No, no friction at all. Again, given overall cost structure in the boroughs, obviously the rates change are different in Queens than they are in Brooklyn, than they are in the Bronx, it's a little bit asset-specific. But we have -- we are not in every property anywhere near where free supply rates had been on a few of our assets. So the customer base is accustomed to the cost of storage. The in-place customers are used to the process of rate increases on an annual basis, and so no concerns from our perspective, we have quite a few markets that had a significant influx of supply, most of that from us. Coney Island is a great example of that where our original store in Coney Island is still a bit away from getting to where its rents were before we opened Neptune in Cropsey too. So comfortable with where we are, still believe we have room to continue to grow.

Todd Stender -- Wells Fargo Securities LLC. -- Analyst

That's helpful. And then same-store expense growth guidance, looks like it can get as high as 5.5%. But you've had pretty good experience keeping expenses in check, especially in Q4. What could drive that toward the high end of the range?

Christopher P. Marr -- President and Chief Executive Officer

Well, I think you have a number of things that are largely driven by tough comps in 2020, you had some periods in the height of the pandemic where you had lower expenditures that create a tough comp. I think the good news that I talked about in my opening remarks as it relates to real estate taxes here in the fourth quarter of 2020 is great news for this quarter, creates a tough comp as you roll that forward then into 2021, because it's hard to have real estate tax refunds be a recurring event at times.

So certainly there are some areas of good news. We continue to find very good ways to spend marketing dollars that we think on a return basis are very attractive to us to drive the top line. So marketing expense will continue -- we'll continue to look at that on a daily basis to find good opportunities and we expect we'll continue to find some of those opportunities in 2021.

So it's a combination of a lot of those things, it's obviously snowed here a little bit in the first part of the year and it didn't last year and so a lot of small things that drive our expectations to be within the range that we put in the release.

Todd Stender -- Wells Fargo Securities LLC. -- Analyst

Okay. Thanks, Tim.

Timothy M. Martin -- Chief Financial Officer

Thanks.

Operator

Our next question will come from Michael Lehman with Evercore ISI. Please go ahead.

Michael Lehman -- Evercore ISI -- Analyst

Hey guys, congrats on the quarter. Just a quick one from me on acquisitions. Can you maybe speak a bit more about the types of opportunities that you're looking at within guidance whether it's more stabilized, or it's more lease-up and maybe that kind of cap rates that are around those buckets?

Timothy M. Martin -- Chief Financial Officer

Yeah. We try to have a pretty, also we have a pretty open view on what we look at as it relates to stabilized versus non-stabilized. Where we don't have a particular open view is that we are -- we have a long-stated strategy of where we want to grow and the quality of the assets that we want to have on balance sheet to represent our on-balance-sheet portfolio, so we'll be looking for those opportunities that fit from that standpoint. And then when it comes down to whether stabilized or not stabilized or whether there are opportunities for expanded performance under our platform, all of that goes into the underwriting and also it comes down to where we're comfortable transacting based on a risk-adjusted return.

So we're still looking for opportunities across the gamut. We would still consider a ground-up development. We're certainly slowing that down, but we're not close to looking at that all the way to something that's fully stabilized. And again we'll price those opportunities differently across that spectrum. But in the guidance that we provided at least the range of where we think we can comfortably transact, there is nothing embedded in that -- that's -- that we're focused on one particular type of acquisition as it relates to stable versus non-stable.

Christopher P. Marr -- President and Chief Executive Officer

Hey, this is Chris. I think one thing that's fascinating to me. And now, I'm just going to be the old guy from up, you used to look at an asset that was stable and as part of your upside, it was putting it on your platform and all the sophistication that comes along with that, the marketing of those assets for sale has shifted a bit to say, well, you know, the operator is not very sophisticated or there is all this opportunity on savings or you can do marketing more efficiently. But with an expectation that the buyer is going to pay for that.

So this is where we get into a bit of perhaps differing ways to think about the underwriting that's -- that embedded growth is what we're entitled to because we're going to earn it. And so that's a little bit of a challenge on stabilized deals today is this movement to where you ought to pay to work hard to get all the upside that the current operator isn't achieving.

Michael Lehman -- Evercore ISI -- Analyst

Got it. That makes sense. Thanks for the color.

Operator

Our next question will come from Mike Miller with JPMorgan. Please go ahead.

Michael Miller -- JPMorgan Chase & Co. -- Analyst

Yeah, hi. I may have missed this, but I think you said move-in rates were up 20% year over year today, and I was just curious, what was that comp in the fourth quarter?

Timothy M. Martin -- Chief Financial Officer

High-teens. So it continues to push up across the country.

Michael Miller -- JPMorgan Chase & Co. -- Analyst

Got it. And then I guess on the development front, can you talk about what your underwriting now for a timeframe to stabilize a project and if it's changed at all from pre-pandemic?

Timothy M. Martin -- Chief Financial Officer

It hasn't really changed. I think if you had a smaller opportunity, smaller in square footage, something that was closer to 50,000 feet, I think you could still look at getting to a stabilized level of physical occupancy in three rental seasons and then fully stabilize in four. I think if you look at a larger store, if you get something that's 150,000 feet or larger, I think you can add at least a year to that, if not two. So part of it depends on where it is, and part of it depends on how big it is. But those numbers that I just gave you haven't changed. I would have answered that question the same way a year ago or two years ago.

Michael Miller -- JPMorgan Chase & Co. -- Analyst

Got it, OK. That was it. Thank you.

Timothy M. Martin -- Chief Financial Officer

Great. Thank you.

Operator

This will conclude our question-and-answer session. I would like to turn the conference back over to Christopher Marr for any closing remarks.

Christopher P. Marr -- President and Chief Executive Officer

Okay, thanks everybody for participating in the call. I know it's been a long earnings season and we're getting to the end here. So we appreciate your focus on CubeSmart. Thank you for the recognition of the high-quality results we posted in the quarter. We look forward to a very constructive '21. I hope you all remain safe and we look forward to speaking to those of you on the call who are participating in upcoming conferences and then we'll talk to you again at the end of the first quarter.

So it will be here before you know it, hang in there and talk to you soon. Bye-bye.

Operator

[Operator Closing Remarks].

Duration: 45 minutes

Call participants:

Josh Schutzer -- Senior Director, Finance

Christopher P. Marr -- President and Chief Executive Officer

Timothy M. Martin -- Chief Financial Officer

Alua Askarbek -- Bank of America Merrill Lynch -- Analyst

Juan Sanabria -- BMO Capital Markets -- Analyst

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Ki Bin Kim -- Truist Financial -- Analyst

Smedes Rose -- Citi -- Analyst

Todd Stender -- Wells Fargo Securities LLC. -- Analyst

Michael Lehman -- Evercore ISI -- Analyst

Michael Miller -- JPMorgan Chase & Co. -- Analyst

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