5. INVESTMENT IN STORAGE FACILITIES AND INTANGIBLE ASSETS

The Company acquired 33 self-storage facilities during the six months ended June 30, 2021. The acquisitions of these facilities were accounted for as asset acquisitions. The costs of the facilities, including closing costs, were allocated to land, building, equipment and improvements, and in-place customer leases based upon their relative fair values.

The facility purchased in New York in the first quarter of 2021 was acquired from SNL Orix Merrick (“Merrick”), an unconsolidated joint venture in which the Company holds a 5% ownership interest. In accordance with ASC Topic 970, “Real Estate – General,” the

Company recorded its equity in the profit from the sale of this self-storage facility as a reduction in the respective purchase price allocated to land and depreciable fixed assets. In addition to the $47.9 million cash payment for the self-storage facility acquired from Merrick, the Company also recognized $0.8 million as a return on the Company’s investment in Merrick as discussed further in Note 10.

Non-cash investing activities during the six months ended June 30, 2021 include the assumption of net other liabilities totaling $2.6 million.

The Company measures the fair value of in-place customer lease intangible assets based on the Company’s experience with customer turnover and the cost to replace the in-place leases. The Company amortizes in-place customer leases on a straight-line basis over 12 months (the estimated future benefit period). The Company measures the value of trade names, which have an indefinite life and are not amortized, by calculating discounted cash flows utilizing the relief from royalty method.

Amortization expense related to in-place customer leases was $2.7 million and $4.7 million for the three and six months ended June 30, 2021, respectively, and $1.5 million and $2.8 million for the three and six months ended June 30, 2020, respectively, and is included in depreciation and amortization expense on the consolidated statements of operations.

Change in Useful Life Estimates

As part of the Company’s capital improvement efforts during 2020 and 2021, buildings at certain self-storage facilities were identified for replacement. As a result of the decision to replace these buildings, the Company reassessed the estimated useful lives of the then existing buildings. This useful life reassessment resulted in an increase in depreciation expense of approximately $1.1 million and $2.5 million during the three and six months ended June 30, 2021, respectively. There were no facilities identified for replacement or related impact on depreciation expense during the three and six months ended June 30, 2020. The Company estimates that due to buildings recently identified for replacement, the change in estimated useful lives of buildings identified for replacement as of June 30, 2021 will have a minimal impact on depreciation expense during the remainder of 2021.

The accelerated depreciation resulting from the events discussed above reduced both basic and diluted earnings per share/unit by approximately $0.01 and $0.03 for the three and six months ended June 30, 2021, respectively.