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:
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:
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:
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.
The entire disclosure for certain real estate investment financial statements, real estate investment trust operating support agreements, real estate owned, retail land sales, time share transactions, as well as other real estate related disclosures.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef