Annual report pursuant to Section 13 and 15(d)

Investment In Joint Ventures

v2.4.0.6
Investment In Joint Ventures
12 Months Ended
Dec. 31, 2011
Investment In Joint Ventures [Abstract]  
Investment In Joint Ventures

12. INVESTMENT IN JOINT VENTURES

The Company has a 20% ownership interest in Sovran HHF Storage Holdings LLC ("Sovran HHF"), a joint venture that was formed in May 2008 to acquire self-storage properties that are managed by the Company. The carrying value of the Company's investment at December 31, 2011 was $20.2 million. Twenty five properties were acquired by Sovran HHF in 2008 for approximately $171.5 million and no additional properties have been acquired by Sovran HHF since then. In 2008, the Company contributed $18.6 million to the joint venture as its share of capital required to fund the acquisitions. In 2011 the Company contributed an additional $0.8 million to the joint venture. As of December 31, 2011, the carrying value of the Company's investment in Sovran HHF exceeds its share of the underlying equity in net assets of Sovran HHF by approximately $1.7 million as a result of the capitalization of certain acquisition related costs in 2008. This difference is included in the carrying value of the investment, which is assessed for other-than-temporary impairment on a periodic basis. No other-than-temporary impairments have been recorded on this investment.

 

The Company has a 15% ownership interest in Sovran HHF Storage Holdings II LLC ("Sovran HHF II"), a joint venture that was formed in 2011 to acquire self-storage properties that are managed by the Company. The carrying value of the Company's investment at December 31, 2011 was $11.7 million. Twenty properties were acquired by Sovran HHF II during 2011 for approximately $166.1 million. During 2011, the Company contributed $12.8 million to the joint venture as its share of capital required to fund the acquisitions. The carrying value of this investment, which is assessed for other-than-temporary impairment on a periodic basis and no other-than-temporary impairments have been recorded on this investment.

As manager of Sovran HHF and Sovran HHF II, the Company earns a management and call center fee of 7% of gross revenues which totaled $1.9 million, $1.3 million, and $1.2 million for 2011, 2010, and 2009, respectively. The Company also received an acquisition fee of $0.7 million, for securing purchases for Sovran HHF II in 2011. The Company's share of Sovran HHF and Sovran HHF II's (loss) income for 2011, 2010 and 2009 was ($0.4 million), $0.3 million and $0.2 million, respectively.

The Company also has a 49% ownership interest in Iskalo Office Holdings, LLC, which owns the building that houses the Company's headquarters and other tenants. The Company's investment includes a capital contribution of $196,049. The carrying value of the Company's investment is a liability of $0.5 million at December 31, 2011 and $0.6 million at December 31, 2010, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets. For the years ended December 31, 2011, 2010, and 2009, the Company's share of Iskalo Office Holdings, LLC's (loss) income was ($82,000), ($79,000) and $7,000, respectively. The Company paid rent to Iskalo Office Holdings, LLC of $688,000, $644,000 and $608,000 in 2011, 2010, and 2009, respectively. Future minimum lease payments under the lease are $0.7 million per year through 2015.

A summary of the unconsolidated joint ventures' financial statements as of and for the year ended December 31, 2011 is as follows:

 

(dollars in thousands)

   Sovran
HHF

Storage
Holdings
LLC
    Sovran
HHF

Storage
Holdings II
LLC
    Iskalo
Office

Holdings,
LLC
 

Balance Sheet Data:

      

Investment in storage facilities, net

   $ 162,668     $ 164,605     $ —     

Investment in office building

     —          —          5,321  

Other assets

     3,936       3,436       580  
  

 

 

   

 

 

   

 

 

 

Total Assets

   $ 166,604     $ 168,041      $ 5,901   
  

 

 

   

 

 

   

 

 

 

Due to the Company

   $ 276     $ 313     $ —     

Mortgages payable

     71,239       88,300       6,752  

Other liabilities

     2,518       1,513       731  
  

 

 

   

 

 

   

 

 

 

Total Liabilities

     74,033       90,126       7,483  

Unaffiliated partners' equity (deficiency)

     74,057       66,228       (1,080 )

Company equity (deficiency)

     18,514       11,687       (502 )
  

 

 

   

 

 

   

 

 

 

Total Liabilities and Partners' Equity (deficiency)

   $ 166,604      $ 168,041      $ 5,901   
  

 

 

   

 

 

   

 

 

 

Income Statement Data:

      

Total revenues

   $ 18,393     $ 8,732     $ 923  

Depreciation and amortization of customer list

     (3,667 )     (2,234 )     (221 )

Other expenses

     (12,995 )     (11,591 )     (869 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 1,731      $ (5,093   $ (167
  

 

 

   

 

 

   

 

 

 

 

Included in other expenses of Sovran HHF II for the year ended December 31, 2011 is $5.5 million of property acquisition related costs. The Company does not guarantee the debt of Sovran HHF, Sovran HHF II, or Iskalo Office Holdings, LLC.

We do not expect to have material future cash outlays relating to these joint ventures outside our share of capital for future acquisitions of properties by Sovran HHF II. A summary of our cash flows arising from the off-balance sheet arrangements with Sovran HHF, Sovran HHF II and Iskalo Office Holdings, LLC for the three years ended December 31, 2011 are as follows:

 

     Year ended December 31,  
(dollars in thousands)    2011     2010     2009  

Statement of Operations

      

Other operating income (management fees and acquisition fee income)

   $ 2,578      $ 1,260      $ 1,243   

General and administrative expenses (corporate office rent)

     688        644        608   

Equity in (losses) income of joint ventures

     (340     241        235   

Distributions from unconsolidated joint ventures

     944        494        686   

Investing activities

      

Investment in joint ventures

     (13,571     —          (331

(Advances to) reimbursement of advances to joint ventures

     (413     (80     163