Quarterly report pursuant to Section 13 or 15(d)

Investment in Joint Ventures

v3.19.1
Investment in Joint Ventures
3 Months Ended
Mar. 31, 2019
Equity Method Investments And Joint Ventures [Abstract]  
Investment in Joint Ventures

10. INVESTMENT IN JOINT VENTURES

A summary of the Company’s unconsolidated joint ventures is as follows:

 

Venture

 

Number of

Properties at

Mar. 31, 2019

 

Company common

ownership interest at Mar. 31, 2019

 

 

Carrying value

of investment

at Mar. 31, 2019

 

Carrying value

of investment

at Dec. 31, 2018

Sovran HHF Storage Holdings LLC (“Sovran HHF”)1

 

57

 

20%

 

 

$84.9 million

 

$85.8 million

Sovran HHF Storage Holdings II LLC (“Sovran

   HHF II”)2

 

30

 

15%

 

 

$13.4 million

 

$13.4 million

191 III Life Storage Holdings LLC (“191 III”)3

 

6

 

20%

 

 

$9.3   million

 

$9.3   million

Life Storage-SERS Storage LLC (“SERS”)4

 

3

 

20%

 

 

$3.4   million

 

$3.5   million

Life Storage-HIERS Storage LLC (“HIERS”)5

 

12

 

20%

 

 

$9.3   million

 

$9.3   million

Iskalo Office Holdings, LLC (“Iskalo”)6

 

N/A

 

49%

 

 

($0.4   million)

 

($0.4    million)

Urban Box Coralway Storage, LLC (“Urban Box”)7

 

1

 

85%

 

 

$4.3   million

 

$4.4   million

SNL/Orix 1200 McDonald Ave., LLC (“McDonald”)8

 

1

 

5%

 

 

$2.8   million

 

$2.8   million

SNL Orix Merrick, LLC (“Merrick”)9

 

1

 

5%

 

 

$2.5   million

 

$2.5   million

N 32nd Street Self Storage, LLC (“N32”)10

 

1

 

46%

 

 

$1.2   million

 

$1.2   million

NYX Don Mills Storage LP ("Don Mills")11

 

1*

 

17%

 

 

$1.0   million

 

$1.0   million

NYX Sheridan Storage LP ("Sheridan")12

 

1*

 

38.3%

 

 

$0.7   million

 

$0.7   million

NYX Appleby Storage LP ("Appleby")13

 

1*

 

37.5%

 

 

$1.0   million

 

$1.0   million

Bluebird Sanford Storage LP ("Sanford")14

 

1

 

20.5%

 

 

$0.3   million

 

N/A

Bluebird Ingram Storage LP ("Ingram")15

 

1

 

46.3%

 

 

$1.3   million

 

N/A

*Property in development stage

 

 

 

 

 

 

 

 

 

 

 

1

Sovran HHF owns self-storage facilities in Arizona (11), Colorado (4), Florida (3), Georgia (1), Kentucky (2), Nevada (5), New Jersey (2), Ohio (6), Pennsylvania (1), Tennessee (2) and Texas (20). Sovran HHF has entered into non-recourse mortgage loans with $219.6 million of principal outstanding at March 31, 2019. During the three months ended March 31, 2019, the Company received $1.7 million of distributions from Sovran HHF. As of March 31, 2019, 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.

2

Sovran HHF II owns self-storage facilities in New Jersey (17), Pennsylvania (3), and Texas (10). Sovran HHF II has entered into non-recourse mortgage loans with $87.8 million of principal outstanding at March 31, 2019. During the three months ended March 31, 2019, the Company received $0.5 million of distributions from Sovran HHF II.

3

191 III owns six self-storage facilities in California. 191 III has entered into a non-recourse mortgage loan with $57.2 million of principal outstanding at March 31, 2019. During the three months ended March 31, 2019, the Company contributed $0.1 million as its share of capital to the joint venture. During the three months ended March 31, 2019, the Company received $0.1 million of distributions from 191 III.

4

SERS owns three self-storage facilities in Georgia. SERS has entered into a non-recourse mortgage loan with $22.0 million of principal outstanding at March 31, 2019. During the three months ended March 31, 2019, the Company did not make any contributions to SERS and distributions received from SERS were minimal.

5

HIERS owns self-storage facilities in Arizona (2), Florida (1), North Carolina (1), Texas (7), and Virginia (1) which were acquired from the Company in the fourth quarter of 2018. HIERS has entered into a non-recourse mortgage loan with $45.4 million of principal outstanding at March 31, 2019. During the three months ended March 31, 2019, the Company received $0.1 million of distributions from HIERS.

6

Iskalo owns the building that houses the Company’s headquarters and other tenants. The Company paid rent to Iskalo of $0.3 million during each of the three months ended March 31, 2019 and 2018.

7

Urban Box owns a self-storage facility in Florida. Urban Box has entered into a non-recourse mortgage loan with $6.7 million of principal outstanding at March 31, 2019.

8

McDonald owns a self-storage facility in New York. McDonald has entered into a non-recourse mortgage loan with $11.6 million of principal outstanding at March 31, 2019.

9

Merrick owns a self-storage facility in New York. Merrick has entered into a non-recourse mortgage loan with $12.3 million of principal outstanding at March 31, 2019.

10

N32 owns a self-storage property in Arizona and has entered into a non-recourse mortgage loan with $6.3 million of principal outstanding at March 31, 2019.  

11

Don Mills is developing a self-storage facility in Ontario, Canada which is expected to be completed in 2020.

12

Sheridan is developing a self-storage facility in Ontario, Canada which is expected to be completed by 2021.

13

Appleby is developing a self-storage facility in Ontario, Canada which is expected to be completed by 2021.

14

Sanford owns a self-storage facility in Ontario, Canada and has entered into a non-recourse mortgage loan with $3.2 million of principal outstanding at March 31, 2019. The Company entered into the Sanford joint venture during 2019 and contributed $0.3 million of common capital to Sanford during 2019 as the Company’s share of the initial capital investment in the joint venture.

15

Ingram owns a self-storage facility in Ontario, Canada and has entered into a non-recourse mortgage loan with $17.6 million of principal outstanding at March 31, 2019. The Company entered into the Ingram joint venture during 2019 and contributed $1.3 million of common capital to Ingram during 2019 as the Company’s share of the initial capital investment in the joint venture.

Based on the facts and circumstances of each of the Company’s joint ventures, the Company has determined that none of the joint ventures are a variable interest entity (“VIE”) in accordance with ASC 810, “Consolidation.” As a result, the Company used the voting model under ASC 810 to determine whether or not to consolidate the joint ventures. Based upon each member’s substantive participation rights over the activities as stipulated in the joint venture agreements, none of the joint ventures are consolidated by the Company. Due to the Company’s significant influence over the operations of each of the joint ventures, all joint ventures are accounted for under the equity method of accounting.

In the first quarter of 2019, the Company acquired the remaining 60% ownership interest in RAP for cash payment of $46.4 million which included the payoff of a $30.0 million mortgage loan previously entered into by RAP and $0.7 million of transfer taxes. RAP had historically been accounted for by the Company using the equity method of accounting. As a result of this transaction, the Company now owns 100% of RAP and has consolidated RAP in accordance with ASC 810, “Consolidation” since the date of acquisition of the remaining 60% ownership interest. The allocated purchase price of RAP also includes the carrying value of the Company’s investment in RAP at the date of acquisition which totaled $10.7 million (see Note 5 for additional information on the accounting for this acquisition).

The carrying values of the Company’s investments in joint ventures are assessed for other-than-temporary impairment on a periodic basis and no such impairments have been recorded on any of the Company’s investments in joint ventures.

The Company earns management and/or call center fees ranging from 5% to 7% of joint venture gross revenues as property manager of the self-storage facilities owned by HHF, HHF II, 191 III, SERS, HIERS, Urban Box, McDonald, Merrick, N32, Sanford and Ingram. The Company also earned management and/or call center fees as property manager of the self-storage facility owned by RAP prior to the Company’s acquisition of the remaining 60% ownership interest in RAP discussed above. These fees, which are included in other operating income in the consolidated statements of operations, totaled $2.1 million and $1.9 million for the three months ended March 31, 2019 and 2018, respectively.

The Company’s share of the unconsolidated joint ventures’ income (loss) is as follows:

 

(dollars in thousands)

Venture

 

Three Months

Ended

March 31, 2019

 

 

Three Months

Ended

March 31, 2018

 

Sovran HHF

 

$

829

 

 

$

689

 

Sovran HHF II

 

 

413

 

 

 

368

 

191 III

 

 

(14

)

 

 

18

 

SERS

 

 

(46

)

 

 

62

 

HIERS

 

 

20

 

 

 

 

RAP

 

 

(280

)

 

 

(216

)

Merrick

 

 

(5

)

 

 

(16

)

McDonald

 

 

(13

)

 

 

 

Urban Box

 

 

(125

)

 

 

 

N32

 

 

(21

)

 

 

 

Iskalo

 

 

53

 

 

 

67

 

 

 

$

811

 

 

$

972

 

 

A summary of the combined unconsolidated joint ventures’ financial statements as of and for the three months ended March 31, 2019 is as follows:

 

(dollars in thousands)

 

 

 

 

Balance Sheet  Data:

 

 

 

 

Investment in storage facilities, net

 

$

1,158,144

 

Investment in office building, net

 

 

4,573

 

Other assets

 

 

20,759

 

Total Assets

 

$

1,183,476

 

Due to the Company

 

$

1,807

 

Mortgages payable

 

 

516,061

 

Other liabilities

 

 

11,018

 

Total Liabilities

 

$

528,886

 

Unaffiliated partners’ equity

 

 

519,642

 

Company equity

 

 

134,948

 

Total Partners’ Equity

 

 

654,590

 

Total Liabilities and Partners’ Equity

 

$

1,183,476

 

Income Statement Data:

 

 

 

 

Total revenues

 

$

30,915

 

Property operating expenses

 

 

(9,832

)

Administrative, management and call center fees

 

 

(2,470

)

Depreciation and amortization of customer list

 

 

(6,823

)

Amortization of financing fees

 

 

(231

)

Income tax expense

 

 

(79

)

Interest expense

 

 

(5,945

)

Net income

 

$

5,535

 

 

The Company does not guarantee the debt of any of its equity method investees.

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 and our share of the payoff of secured debt held by these joint ventures.