-- We assigned our 'BBB-' rating to CubeSmart's proposed $250 million senior unsecured notes due 2022. -- The company plans to use the proceeds from the offering to repay outstanding borrowings under its unsecured credit facility and for general corporate purposes, which may include acquisitions, investments in joint ventures, and repaying other debt. NEW YORK (Standard & Poor's) June 19, 2012--Standard & Poor's Ratings Services today assigned its 'BBB-' rating to a proposed $250 million senior unsecured note offering by CubeSmart. The proposed notes have a 10-year term and carry the traditional REIT covenant package. The company plans to use the proceeds from the offering to repay outstanding borrowings under its unsecured credit facility and for general corporate purposes, which may include acquisitions, investments in joint ventures, and repaying other debt. As of June 15, 2012, the balance on the company's $300 million revolving credit facility was $129 million following the early repayment of $163.6 million of mortgage loans due in the third quarter of 2012. Wayne, Pa.-based CubeSmart (formerly U-Store-It Trust) is one of the five largest self-storage operators in the U.S. As of March 31, 2012, it had 376 properties encompassing over 24.8 million rentable square feet in 26 states and the District of Columbia. The company also manages 102 properties through third-party management contracts. While the company is smaller than many REITs we rate (equity market capitalization of approximately $1.5 billion), CubeSmart maintains a geographically diverse portfolio of properties with concentrations in Florida (16%), New York (14%), California (11%), and Texas (9%), based on revenue for the three months ended March 31, 2012. Our stable ratings outlook on CubeSmart reflects our expectation for relatively steady cash flow given the progress the company has made toward improving occupancy levels and enhancing the quality of its portfolio. We would consider lowering the rating if the company's coverage measures fall below 2.4x for an extended period, perhaps due to macroeconomic weakness that result in occupancy and rental rate declines. We would also consider a downgrade if the company increases dividends to a level that reduces total coverage below 1.0x, or if CubeSmart pursued another large leveraged acquisition that sustained debt-to-EBITDA above currently projected levels. While less likely in the near term, consideration for raising our rating would hinge on the REIT's continued lease-up of the portfolio such that profitability metrics improved to peer levels, demonstrated access to broader sources of capital, an extended average debt tenor, and some debt reduction. For our most recent report on CubeSmart, please see our summary analysis published June 18, 2012. RELATED CRITERIA AND RESEARCH -- Industry Report Card: Improvements in Operating Fundamentals Bode Well for North American REITs, published May 4, 2012. -- Issuer Ranking: North American REITs And Real Estate Operating Companies, Strongest To Weakest, published April 30, 2012. -- Credit FAQ: How Standard & Poor's Applies Its Liquidity Descriptors For Global Corporate Issuers To North American Real Estate Companies, published Oct. 12, 2011. -- Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, published Sept. 8, 2011. -- Key Credit Factors: Global Criteria For Rating Real Estate Companies, published June 21, 2011. RATINGS LIST CubeSmart Corporate credit rating BBB-/Stable/-- RATING ASSIGNED CubeSmart CubeSmart L.P. $250 mil. sr. unsecured notes due 2022 BBB-
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