4. INVESTMENT IN STORAGE FACILITIES AND INTANGIBLE ASSETS

The Company acquired 112 self-storage facilities during 2021 and 40 self-storage facilities during 2020. The acquisitions of these facilities were accounted for as asset acquisitions. The cost of these facilities, including closing costs, was assigned to land, buildings,

equipment, improvements, construction in progress and in-place customer leases based upon their relative fair values. The operating results of the facilities acquired have been included in the Company’s operations since the respective acquisition dates.

The facility purchased in New York in 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,” ("ASC 970") 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 11.

The three facilities purchased in Georgia in September 2021 were acquired from Life Storage-SERS Storage LLC ("SERS"), an unconsolidated joint venture in which the Company holds a 20% ownership interest. In accordance with ASC 970, the Company recorded its equity in the profit from the sale of these self-storage facilities as a reduction in the respective purchase price allocated to land and depreciable fixed assets. In addition to the $51.7 million cash payment for the self-storage facilities acquired from SERS, the Company also recognized $8.3 million as a return on the Company's investment in SERS as discussed further in Note 11.

Twenty-seven of the facilities acquired in 2021 were managed by the Company prior to their respective acquisition. The remaining 81 facilities acquired in 2021 were all acquired from unrelated third-parties.

The six facilities purchased in California during the first quarter of 2020 were acquired from 191 III Life Storage Holdings LLC (“191 III”), an unconsolidated joint venture in which the Company holds a 20% ownership interest. Seventeen of the 25 facilities purchased in the third quarter of 2020 were acquired from Sovran HHF Storage Holdings LLC (“Sovran HHF”) and eight of the 25 facilities purchased in the third quarter of 2020 were acquired from Sovran HHF Storage Holdings II LLC (“Sovran HHF II”), unconsolidated joint ventures in which the Company holds 20% and 15% ownership interests, respectively. In accordance with ASC 970, the Company recorded its equity in the profit from the sales of these self-storage facilities as a reduction in the respective purchase price allocated to land and depreciable fixed assets. In addition to the $124.2 million cash payment for the six self-storage facilities acquired from 191 III, the Company also recognized $8.4 million as a return on the Company’s investment in 191 III as discussed further in Note 11. In addition to the $293.7 million combined cash payments for the 25 self-storage facilities acquired from Sovran HHF and Sovran HHF II, the Company also recognized $32.7 million as a return on the Company’s investments in Sovran HHF and Sovran HHF II as discussed further in Note 11.

The facility acquired in Florida in November 2020 was acquired as the result of the Company’s acquisition of the remaining 15% ownership interest in Urban Box Coralway Storage, LLC (“Urban Box”). Prior to this acquisition, Urban Box was a joint venture between the Company and an otherwise unrelated third-party which had been accounted for by the Company using the equity method of accounting. The purchase price for this acquisition includes the carrying value of the Company’s equity investment in Urban Box of $3.4 million at the time of the acquisition.

One of the facilities acquired in Florida in 2020 and the facility acquired in New York in 2020 were managed by the Company prior to their respective acquisition. The remaining seven facilities acquired in 2020 were all acquired from unrelated third-parties.

Non-cash investing activities during 2021 include the issuance of $89.8 million of preferred Operating Partnership Units valued based upon the terms of the preferred Operating Partnership Units as compared to market rates for similar instruments at the time of acquisition, the issuance of $82.9 million of common Operating Partnership Units based on the average closing price of the Parent Company's common stock for a stated number of days prior to closing on the related self-storage facility acquisitions, and the assumption of net other liabilities totaling $8.9 million. Non-cash investing activities during 2020 include the Company’s equity investment in Urban Box at carrying value, the assumption of a mortgage with an acquisition-date fair values of $6.4 million, and the assumption of net other liabilities totaling $1.8 million. Non-cash investing activities during 2019 include the Company’s equity investment in Review Avenue Partners (“RAP”) at its carrying value, the assumption of mortgages with acquisition-date fair values totaling $23.0 million, and the assumption of net other liabilities totaling $0.8 million. RAP was a joint venture between the Company and an otherwise unrelated third-party from which the Company acquired a self-storage facility in 2019.

The Company measures the fair value of in-place customer lease intangible assets based on the Company’s experience with customer turnover and the estimated 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).

Amortization expense related to in-place customer leases totaled $12.4 million, $5.6 million, and $2.9 million, during the years ended December 31, 2021, 2020, and 2019, respectively. Amortization expense is expected to be $14.0 million in 2022 based on in-place customer leases at December 31, 2021.

Property Dispositions

No self-storage facilities were sold during 2021 or 2020. During 2019, the Company sold 32 non-strategic properties and received net cash proceeds of $207.6 million. The sale resulted in a gain of $100.2 million, which is reflected within gain on sale of storage facilities in the 2019 consolidated statement of operations. The Company subsequently leased a property it had sold during 2017 and continued to operate the

property through November 2019. Due to the Company’s continuing involvement in this property, the related gain on the sale of this property of $4.1 million was deferred and recognized by the Company in 2019 upon termination of this lease. This gain is reflected within gain on sale of storage facilities in the 2019 consolidated statement of operations.

Change in Useful Life Estimates

As part of the Company’s capital improvement efforts, buildings at certain self-storage facilities were identified for replacement during 2021, 2020, and 2019. 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 increases in depreciation expense of approximately $2.5 million, $5.8 million, and $1.1 million in 2021, 2020, and 2019, respectively. The Company estimates that the change in estimated useful lives of buildings identified for replacement as of December 31, 2021 will not have a significant impact on depreciation expense in 2022.

The accelerated depreciation resulting from the events discussed above reduced both basic and diluted earnings per share/unit by approximately $0.03, $0.08, and $0.02 per share/unit in 2021, 2020, and 2019, respectively.