Quarterly report pursuant to Section 13 or 15(d)

Investment in Storage Facilities and Intangible Assets

v3.22.1
Investment in Storage Facilities and Intangible Assets
3 Months Ended
Mar. 31, 2022
Real Estate [Abstract]  
Investment in Storage Facilities and Intangible Assets

5. INVESTMENT IN STORAGE FACILITIES AND INTANGIBLE ASSETS

The following summarizes our activity in storage facilities during the three months ended March 31, 2022:

 

(dollars in thousands)

 

 

 

Cost:

 

 

 

Beginning balance

 

$

7,090,457

 

Acquisition of storage facilities

 

 

348,017

 

Improvements and equipment additions

 

 

10,693

 

Net increase in construction in progress

 

 

5,430

 

Dispositions

 

 

(189

)

Ending balance

 

$

7,454,408

 

Accumulated Depreciation:

 

 

 

Beginning balance

 

$

1,007,650

 

Additions during the period

 

 

40,800

 

Dispositions

 

 

(151

)

Ending balance

 

$

1,048,299

 

The Company acquired 18 self-storage facilities during the three months ended March 31, 2022. 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 operating results of the facilities acquired have been included in the Company's operations since the respective acquisition dates.

The purchase prices of the facilities acquired in 2022 have been assigned as follows:

 

(dollars in thousands)

 

 

 

 

 

 

 

Consideration paid

 

 

Acquisition Date Fair Value

 

States

 

Number
of
Properties

 

 

Date of
Acquisition

 

Purchase
Price

 

 

Cash
Paid

 

 

Net Other
Liabilities
(Assets)
Assumed

 

 

Land

 

 

Building,
Equipment,
and
Improvements

 

 

In-Place
Customer
Leases

 

CA

 

 

6

 

 

1/4/2022

 

$

165,225

 

 

$

165,160

 

 

$

65

 

 

$

20,321

 

 

$

143,243

 

 

$

1,661

 

GA, NC, SC

 

 

3

 

 

3/11/2022

 

 

48,586

 

 

 

48,446

 

 

 

140

 

 

 

3,926

 

 

 

44,300

 

 

 

360

 

IL, NC, TX

 

 

8

 

 

3/15/2022

 

 

116,048

 

 

 

115,410

 

 

 

638

 

 

 

12,292

 

 

 

102,439

 

 

 

1,317

 

MD

 

 

1

 

 

3/28/2022

 

 

21,651

 

 

 

21,646

 

 

 

5

 

 

 

1,640

 

 

 

19,856

 

 

 

155

 

Total acquired in 2022

 

 

18

 

 

 

 

$

351,510

 

 

$

350,662

 

 

$

848

 

 

$

38,179

 

 

$

309,838

 

 

$

3,493

 

 

Non-cash investing activities during the three months ended March 31, 2022 include the assumption of net other liabilities totaling $0.8 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.

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

 

(Dollars in thousands)

 

March 31,
2022

 

 

December 31,
2021

 

In-place customer leases

 

$

111,279

 

 

$

107,786

 

Accumulated amortization

 

 

(99,425

)

 

 

(93,820

)

Net carrying value at the end of period

 

$

11,854

 

 

$

13,966

 

 

Amortization expense related to in-place customer leases was $5.6 million and $2.1 million for the three months ended March 31, 2022 and 2021, 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, buildings at certain self-storage facilities were identified for replacement during 2020, 2021, and 2022. 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 $0.1 million during the three months ended March 31, 2022 and approximately $1.4 million during the three months ended March 31, 2021. The Company estimates that due to buildings recently identified for replacement, the change in estimated useful lives of buildings identified for replacement as of March 31, 2022 will have a minimal impact on depreciation expense during the remainder of 2022.

The accelerated depreciation resulting from the events discussed above had minimal impact on earnings per share/unit for the three months ended March 31, 2022 and reduced both basic and diluted earnings per share/unit by $0.02 for the three months ended March 31, 2021.