Shares of CubeSmart (NYSE:CUBE), a self-storage real estate investment trust (REIT), rose just under 13% in May, according to data from S&P Global Market Intelligence. That advance left the stock down just about 10% through the first five months of 2020 -- not exactly great, noting that the S&P 500 Index was down about 5% over the same span.
The truth is, compared with some property types, including retail, hotels, and entertainment, CubeSmart's stock has performed incredibly well. Since operating self-storage facilities doesn't particularly involve lots of ongoing interaction with customers, it hasn't been hit as hard by the efforts to contain the spread of COVID-19. In fact, self storage was actually designated an essential business, which allowed the REIT to continue to operate throughout the lockdown.
But CubeSmart isn't exactly immune to what's been going on in the world. When it released first-quarter earnings in early May, it noted that occupancy was down, rent collection had fallen a bit, and it had decided to freeze rent increases. That's all less-than-desirable news, but these facts need to be put into context. Both move-ins and move-outs were down, leading to occupancy of 91.8% at the end of the quarter, a very respectable number and down just half a percentage point versus the previous year.
Meanwhile, the REIT collected 93% of April rent, below the 98% from the previous year, but hardly a devastating hit. And although the rent freeze will hurt its top-line growth, the goodwill from this gesture should help it in the long term. Put it all together, and it's understandable that Wall Street was increasingly upbeat about CubeSmart in May and basically throughout the COVID-19 pandemic.
Investors with a dividend focus might want to take a closer look at CubeSmart today. But that has less to do with COVID-19 than the resilient nature of its self-storage business model. This difficult period has highlighted that once customers put a box in storage, they are loath to move it. That's great news for CubeSmart, even during periods of severe economic upheaval. Which is notable, since the efforts to contain the coronavirus seem likely to push the U.S. into a recession.