Bank Of America Reiterates Buy At CubeSmart

In a report published Monday, Bank of America analyst Jana Galan commented on a recent meeting with

's management team including President and CEO Chris Marr, CFO Tim Martin and IR Charlie Place. Galan noted that CubeSmart posted an "impressive" first quarter results, but investors are still concerned on the potential industry and company specific risks that could negatively impact the positive fundamental trends the self storage industry is currently enjoying. "The discussions made us even more constructive on the second and we do not expect supply growth to have an impact on CubeSmart's portfolio for the next two leasing seasons," Galan wrote. "We view storage as an indirect beneficiary of the declining home ownership rate and millennials (as well as some babyboomers) preference for urban living, providing a secular tailwind for the sector for multiple years." Galan continued that CubeSmart is currently tracking 28 developments within its top 10 MSAs, up from 18 at the end of the fourth quarter. Of those, 12 are expected to open in 2015 and the rest in 2016, but the company could face delays as they are seeing difficulties within their own Certificate of Occupancy (CofO) development pipeline in getting permits and inspections done on time. With that said, Galan concluded that it is too early to have visibility on what the company's supply pipeline will look like post-2016. Galan also noted that CubeSmart's management does not look at supply relative to population growth but rather on a local basis and expects occupancies to "hold up" with near-term pressure on rates during a competitors lease-up. Shares remain Buy rated with a price target raised to $27 from a previous $25 – based on an approximate 10 percent premium to the analyst's $24.50 forward net asset value (NAV).