Annual report pursuant to Section 13 and 15(d)

Investment in Storage Facilities and Intangible Assets

v3.22.0.1
Investment in Storage Facilities and Intangible Assets
12 Months Ended
Dec. 31, 2021
Real Estate [Abstract]  
Investment in Storage Facilities and Intangible Assets

4. INVESTMENT IN STORAGE FACILITIES AND INTANGIBLE ASSETS

The following summarizes activity in storage facilities during the years ended December 31, 2021 and December 31, 2020.

 

(dollars in thousands)

 

2021

 

 

2020

 

Cost:

 

 

 

 

 

 

Beginning balance

 

$

5,330,323

 

 

$

4,749,473

 

Acquisition of storage facilities

 

 

1,675,366

 

 

 

523,922

 

Improvements and equipment additions

 

 

59,569

 

 

 

67,069

 

Net increase (decrease) in construction in progress

 

 

25,946

 

 

 

(9,632

)

Dispositions

 

 

(747

)

 

 

(509

)

Ending balance

 

$

7,090,457

 

 

$

5,330,323

 

Accumulated Depreciation:

 

 

 

 

 

 

Beginning balance

 

$

873,178

 

 

$

756,333

 

Additions during the year

 

 

134,773

 

 

 

117,168

 

Dispositions

 

 

(301

)

 

 

(323

)

Ending balance

 

$

1,007,650

 

 

$

873,178

 

 

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 purchase price of the 112 facilities acquired in 2021 and the 40 facilities acquired in 2020 has been assigned as follows:

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

Consideration Paid

 

 

Acquisition Date Fair Value

 

States

 

Number of
Properties

 

 

Date of
Acquisition

 

Purchase
Price

 

 

Cash Paid

 

 

Value of Operating Partnership Units Issued

 

 

Net Other
Liabilities
Assumed
(Assets
Acquired)

 

 

Land

 

 

Building,
Equipment,
and
Improvements

 

 

In-Place
Customer
Leases

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SC

 

 

1

 

 

1/4/2021

 

$

8,070

 

 

 

8,042

 

 

$

 

 

$

28

 

 

$

812

 

 

$

7,153

 

 

$

105

 

CA

 

 

1

 

 

1/21/2021

 

 

18,287

 

 

 

18,251

 

 

 

 

 

 

36

 

 

 

1,322

 

 

 

16,830

 

 

 

135

 

NY

 

 

1

 

 

3/4/2021

 

 

47,947

 

 

 

47,933

 

 

 

 

 

 

14

 

 

 

10,591

 

 

 

37,020

 

 

 

336

 

FL

 

 

8

 

 

3/11/2021

 

 

85,156

 

 

 

84,586

 

 

 

 

 

 

570

 

 

 

13,381

 

 

 

70,538

 

 

 

1,237

 

AZ

 

 

3

 

 

3/24/2021

 

 

67,089

 

 

 

66,890

 

 

 

 

 

 

199

 

 

 

7,129

 

 

 

59,320

 

 

 

632

 

WA

 

 

2

 

 

3/25/2021

 

 

39,666

 

 

 

39,495

 

 

 

 

 

 

171

 

 

 

6,166

 

 

 

33,037

 

 

 

443

 

FL

 

 

1

 

 

5/3/2021

 

 

16,545

 

 

 

16,497

 

 

 

 

 

 

48

 

 

 

1,658

 

 

 

14,739

 

 

 

148

 

NJ

 

 

5

 

 

5/12/2021

 

 

90,944

 

 

 

90,710

 

 

 

 

 

 

234

 

 

 

11,557

 

 

 

78,116

 

 

 

1,271

 

NC

 

 

2

 

 

6/1/2021

 

 

26,942

 

 

 

26,793

 

 

 

 

 

 

149

 

 

 

2,209

 

 

 

24,395

 

 

 

338

 

TX

 

 

4

 

 

6/10/2021

 

 

44,563

 

 

 

43,952

 

 

 

 

 

 

611

 

 

 

9,163

 

 

 

34,746

 

 

 

654

 

FL

 

 

1

 

 

6/16/2021

 

 

14,344

 

 

 

14,235

 

 

 

 

 

 

109

 

 

 

2,601

 

 

 

11,526

 

 

 

217

 

FL, NH

 

 

3

 

 

6/22/2021

 

 

59,618

 

 

 

59,257

 

 

 

 

 

 

361

 

 

 

19,101

 

 

 

39,752

 

 

 

765

 

NC

 

 

1

 

 

6/23/2021

 

 

14,539

 

 

 

14,468

 

 

 

 

 

 

71

 

 

 

657

 

 

 

13,695

 

 

 

187

 

NH

 

 

2

 

 

7/29/2021

 

 

22,315

 

 

 

22,311

 

 

 

 

 

 

4

 

 

 

6,271

 

 

 

15,743

 

 

 

301

 

FL

 

 

1

 

 

8/17/2021

 

 

14,846

 

 

 

14,740

 

 

 

 

 

 

106

 

 

 

2,884

 

 

 

11,789

 

 

 

173

 

AL, CO, FL, GA, KY, OH, OK, SC, TX

 

 

22

 

 

8/19/2021

 

 

229,982

 

 

 

137,188

 

 

 

91,265

 

 

 

1,529

 

 

 

23,173

 

 

 

203,682

 

 

 

3,127

 

AZ

 

 

1

 

 

8/25/2021

 

 

17,190

 

 

 

17,187

 

 

 

 

 

 

3

 

 

 

1,034

 

 

 

15,974

 

 

 

182

 

GA

 

 

3

 

 

9/1/2021

 

 

51,707

 

 

 

51,375

 

 

 

 

 

 

332

 

 

 

5,570

 

 

 

45,447

 

 

 

690

 

TX

 

 

4

 

 

10/1/2021

 

 

58,904

 

 

 

25,180

 

 

 

32,841

 

 

 

883

 

 

 

9,407

 

 

 

48,641

 

 

 

856

 

FL

 

 

2

 

 

10/20/2021

 

 

58,043

 

 

 

57,613

 

 

 

 

 

 

430

 

 

 

13,147

 

 

 

44,281

 

 

 

615

 

GA, NC, SC, TN

 

 

7

 

 

10/21/2021

 

 

129,345

 

 

 

125,778

 

 

 

3,300

 

 

 

267

 

 

 

13,769

 

 

 

114,338

 

 

 

1,238

 

VA

 

 

1

 

 

11/16/2021

 

 

14,488

 

 

 

14,449

 

 

 

 

 

 

39

 

 

 

341

 

 

 

13,963

 

 

 

184

 

ME

 

 

1

 

 

12/2/2021

 

 

20,100

 

 

 

20,082

 

 

 

 

 

 

18

 

 

 

1,669

 

 

 

18,204

 

 

 

227

 

IL

 

 

1

 

 

12/8/2021

 

 

19,044

 

 

 

18,922

 

 

 

 

 

 

122

 

 

 

1,705

 

 

 

17,136

 

 

 

203

 

FL

 

 

1

 

 

12/10/2021

 

 

12,577

 

 

 

12,540

 

 

 

 

 

 

37

 

 

 

2,746

 

 

 

9,661

 

 

 

170

 

FL, GA, IL

 

 

23

 

 

12/13/2021

 

 

369,487

 

 

 

367,635

 

 

 

 

 

 

1,852

 

 

 

47,189

 

 

 

317,719

 

 

 

4,579

 

FL

 

 

1

 

 

12/15/2021

 

 

14,095

 

 

 

14,056

 

 

 

 

 

 

39

 

 

 

2,989

 

 

 

10,924

 

 

 

182

 

CO

 

 

2

 

 

12/16/2021

 

 

33,087

 

 

 

14,334

 

 

 

18,173

 

 

 

580

 

 

 

3,726

 

 

 

28,940

 

 

 

421

 

FL

 

 

1

 

 

12/17/2021

 

 

20,596

 

 

 

20,548

 

 

 

 

 

 

48

 

 

 

737

 

 

 

19,623

 

 

 

236

 

CT

 

 

6

 

 

12/28/2021

 

 

76,801

 

 

 

49,666

 

 

 

27,137

 

 

 

(2

)

 

 

10,461

 

 

 

65,269

 

 

 

1,071

 

Total acquired 2021

 

 

112

 

 

 

 

$

1,696,317

 

 

$

1,514,713

 

 

$

172,716

 

 

$

8,888

 

 

$

233,165

 

 

$

1,442,201

 

 

$

20,923

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

Consideration Paid

 

 

Acquisition Date Fair Value

 

States

 

Number of
Properties

 

 

Date of
Acquisition

 

Purchase
Price

 

 

Cash Paid

 

 

Carrying Value of Noncontrolling Interest in Joint Venture

 

 

Mortgage
Assumed

 

 

Net Other
Liabilities
Assumed
(Assets
Acquired)

 

 

Land

 

 

Building,
Equipment,
and
Improvements

 

 

Construction
in
Progress

 

 

In-Place
Customer
Leases

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CA

 

 

6

 

 

3/9/2020

 

$

124,298

 

 

$

124,204

 

 

$

 

 

$

 

 

$

94

 

 

$

20,307

 

 

$

101,734

 

 

$

582

 

 

$

1,675

 

FL, GA, NJ, OH, PA, TX

 

 

25

 

 

9/29/2020

 

 

295,310

 

 

 

293,726

 

 

 

 

 

 

 

 

 

1,584

 

 

 

32,555

 

 

 

257,844

 

 

 

 

 

 

4,911

 

NJ

 

 

1

 

 

11/5/2020

 

 

13,874

 

 

 

7,521

 

 

 

 

 

 

6,353

 

 

 

 

 

 

2,158

 

 

 

11,498

 

 

 

 

 

 

218

 

FL

 

 

1

 

 

11/25/2020

 

 

11,492

 

 

 

8,162

 

 

 

3,404

 

 

 

 

 

 

(74

)

 

 

2,032

 

 

 

9,325

 

 

 

 

 

 

135

 

MO

 

 

1

 

 

12/9/2020

 

 

7,499

 

 

 

7,453

 

 

 

 

 

 

 

 

 

46

 

 

 

1,312

 

 

 

6,070

 

 

 

 

 

 

117

 

FL

 

 

1

 

 

12/14/2020

 

 

10,776

 

 

 

10,744

 

 

 

 

 

 

 

 

 

32

 

 

 

1,747

 

 

 

8,863

 

 

 

 

 

 

166

 

FL

 

 

1

 

 

12/14/2020

 

 

15,523

 

 

 

15,483

 

 

 

 

 

 

 

 

 

40

 

 

 

1,240

 

 

 

14,063

 

 

 

 

 

 

220

 

SC

 

 

1

 

 

12/22/2020

 

 

9,583

 

 

 

9,548

 

 

 

 

 

 

 

 

 

35

 

 

 

671

 

 

 

8,771

 

 

 

 

 

 

141

 

CA

 

 

1

 

 

12/23/2020

 

 

15,857

 

 

 

15,807

 

 

 

 

 

 

 

 

 

50

 

 

 

3,528

 

 

 

12,127

 

 

 

 

 

 

202

 

NY

 

 

1

 

 

12/28/2020

 

 

16,868

 

 

 

16,873

 

 

 

 

 

 

 

 

 

(5

)

 

 

507

 

 

 

16,195

 

 

 

 

 

 

166

 

CA

 

 

1

 

 

12/30/2020

 

 

11,545

 

 

 

11,515

 

 

 

 

 

 

 

 

 

30

 

 

 

1,588

 

 

 

9,787

 

 

 

 

 

 

170

 

Total acquired 2020

 

 

40

 

 

 

 

$

532,625

 

 

$

521,036

 

 

$

3,404

 

 

$

6,353

 

 

$

1,832

 

 

$

67,645

 

 

$

456,277

 

 

$

582

 

 

$

8,121

 

 

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).

In-place customer leases are included in other assets on the Company’s consolidated balance sheets at December 31 as follows:

 

(dollars in thousands)

 

2021

 

 

2020

 

In-place customer leases

 

$

107,786

 

 

$

86,863

 

Accumulated amortization

 

 

(93,820

)

 

 

(81,455

)

Net carrying value at the end of period

 

$

13,966

 

 

$

5,408

 

 

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.