Quarterly report pursuant to Section 13 or 15(d)

Investment in Storage Facilities

v3.4.0.3
Investment in Storage Facilities
3 Months Ended
Mar. 31, 2016
Real Estate [Abstract]  
Investment in Storage Facilities
4. INVESTMENT IN STORAGE FACILITIES

The following summarizes our activity in storage facilities during the three months ended March 31, 2016.

 

(dollars in thousands)

      

Cost:

  

Beginning balance

   $ 2,491,702   

Acquisition of storage facilities

     327,408   

Improvements and equipment additions

     6,651   

Additions to consolidated subsidiary

     1,815   

Net increase in construction in progress

     6,106   

Dispositions

     (696
  

 

 

 

Ending balance

   $ 2,832,986   
  

 

 

 

Accumulated Depreciation:

  

Beginning balance

   $ 465,195   

Additions during the period

     15,255   

Dispositions

     (591
  

 

 

 

Ending balance

   $ 479,859   
  

 

 

 

The Company acquired 25 facilities during the three months ended March 31, 2016. The acquisition of one store that was acquired at certificate of occupancy was accounted for as an asset acquisition. The cost of this store, including closing costs, was assigned to its land, building, equipment and improvements components based upon their relative fair values. The assets and liabilities of the other 24 storage facilities acquired in 2016, which primarily consist of tangible and intangible assets, are measured at fair value on the date of acquisition in accordance with the principles of FASB ASC Topic 820, “Fair Value Measurements and Disclosures” and were accounted for as business combinations in accordance with the principles of FASB ASC Topic 805 “Business Combinations.” The purchase price of the 25 facilities acquired in 2016 has been preliminarily assigned as follows:

 

(dollars in thousands)

                    Consideration paid     Acquisition Date Fair Value  

State

  Number of
Properties
    Date of
Acquisition
    Purchase Price     Cash Paid     Value of
Operating
Partnership
Units Issued
    Net Other
Liabilities
(Assets)
Assumed
    Land     Building,
Equipment, and
Improvements
    In-Place
Customer
Leases
    Closing
Costs
Expensed
 

2016

                   

Florida

    4        1/6/16      $ 20,350      $ 20,246      $ —        $ 104      $ 6,646      $ 13,339      $ 365      $ 366   

California

    4        1/21/16        78,750        78,562        —          188        27,876        49,860        1,014        327   

New Hampshire

    5        1/21/16        54,225        53,941        —          284        12,902        40,428        895        569   

Massachusetts

    1        1/21/16        11,375        11,350        —          25        4,874        6,335        166        64   

Texas

    3        1/21/16        42,050        41,894        —          156        23,487        18,000        563        247   

Arizona

    1        2/1/16        9,275        9,261        —          14        988        8,224        63        119   

Florida

    1        2/12/16        11,274        11,270        —          4        2,294        8,980        —          —     

Pennsylvania

    1        2/17/16        5,750        5,732        —          18        1,768        3,879        103        147   

Colorado

    1        2/29/16        12,600        12,549        —          51        4,528        7,915        157        170   

California

    3        3/16/16        68,832        63,965        4,472        395        22,647        45,371        814        260   

California

    1        3/17/16        17,320        17,278        —          42        6,728        10,339        253        115   
 

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total acquired 2016

    25        $ 331,801      $ 326,048      $ 4,472      $ 1,281      $ 114,738      $ 212,670      $ 4,393      $ 2,384   

All of the properties acquired were purchased from unrelated third parties. The operating results of the facilities acquired have been included in the Company’s operations since the respective acquisition dates. Of the $326.0 million paid at closing for the properties acquired during 2016, $2.5 million represented deposits that were paid in 2015 when certain of these properties originally went under contract. In addition to the closing costs expensed on 2016 acquisitions, the Company also incurred $345,000 of acquisition costs in 2015 related to facilities acquired in 2016. Non-cash investing activities during 2016 include the issuance of $4.5 million in Operating Partnership Units.

The Company measures the fair value of in-place customer lease intangible assets based on the Company’s experience with customer turnover. The Company amortizes in-place customer leases on a straight-line basis over 12 months (the estimated future benefit period). In-place customer leases are included in other assets on the Company’s balance sheet as follows:

 

     Mar. 31,      Dec. 31,  

(Dollars in thousands)

   2016      2015  

In-place customer leases

   $ 26,714       $ 22,320   

Accumulated amortization

     (22,192      (21,017
  

 

 

    

 

 

 

Net carrying value at the end of period

   $ 4,522       $ 1,303   
  

 

 

    

 

 

 

Amortization expense related to in-place customer leases was $1.2 million and $1.0 million for the three months ended March 31, 2016 and 2015, respectively. The Company expects to record $5.2 million and $0.5 million of amortization expense for the years ended December 31, 2016 and 2017, respectively.

During 2016, the Company acquired 25 properties. The following pro forma information is based on the combined historical financial statements of the Company and the 25 properties acquired, and presents the Company’s results as if the acquisitions had occurred as of January 1, 2015:

 

     Three months
ended
March 31,
2016
     Three months
ended
March 31,
2015
 

Total revenues

   $ 101,551       $ 90,871   

Net income attributable to common shareholders

   $ 31,745       $ 20,173   

Earnings per common share

     

Basic

   $ 0.81       $ 0.52   

Diluted

   $ 0.81       $ 0.51   

The following table summarizes the revenues and earnings related to the 25 properties since the acquisition dates that are included in the Company’s consolidated statements of operations for the three months ended March 31, 2016.

 

     Three months
ended
March 31,
2016
 

Total revenues

   $ 3,754   

Net loss attributable to common shareholders

   $ (1,760

The above net losses attributable to common shareholders were primarily due to the acquisition costs incurred in connection with the 2016 acquisitions.

Property Dispositions

During 2015 the Company sold three non-strategic properties purchased in 2014 and 2015 with a carrying value of $5.1 million and received cash proceeds of $4.6 million, resulting in a $0.5 million loss on sale. The following table summarizes the revenues and expenses up to the dates of sale of the three properties sold in 2015 that are included in the Company’s consolidated statements of operations for 2015.

 

     Jan. 1, 2015  
     to  
(Dollars in thousands)    Mar. 31, 2015  

Total revenues

   $ 40   

Property operations and maintenance expense

     (16

Real estate tax expense

     (5

Depreciation and amortization expense

     (9

Loss on sale of storage facilities

     (7
  

 

 

 
   $ 3