Investments in Unconsolidated Real Estate Entities

9 Months Ended

Sep. 30, 2021

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Real Estate Entities

The following table sets forth our investments in, and equity in earnings of, the Unconsolidated Real Estate Entities (amounts in thousands):


	Investments in Unconsolidated Real Estate Entities at
	September 30, 2021		December 31, 2020

PSB	$	451,336	$	431,963
Shurgard	327,936		341,083
Total	$	779,272	$	773,046


	Equity in Earnings of Unconsolidated Real Estate Entities for the
	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020

PSB	$	27,110	$	16,548	$	62,494	$	51,513
Shurgard	5,750		4,692		18,888		11,350
Total	$	32,860	$	21,240	$	81,382	$	62,863

Investment in PSB

Throughout all periods presented, we owned 7,158,354 shares of PSB’s common stock and 7,305,355 limited partnership units in an operating partnership controlled by PSB, representing an approximate 42% common equity interest. The limited partnership units are convertible at our option, subject to certain conditions, on a one-for-one basis into PSB common stock.

Based upon the closing price at September 30, 2021 ($156.74 per share of PSB common stock), the shares and units we owned had a market value of approximately $2.3 billion.

Our equity in earnings of PSB comprised our equity share of PSB’s net income, less amortization of the PSB Basis Differential (defined below).

During each of the nine month periods ended September 30, 2021 and 2020, we received cash distributions from PSB totaling $45.6 million.

At September 30, 2021, our pro-rata investment in PSB’s real estate assets included in investment in unconsolidated real estate entities exceeds our pro-rata share of the underlying amounts on PSB’s balance sheet by approximately $2.8 million ($3.4 million at December 31, 2020). This differential (the “PSB Basis Differential”) is being amortized as a reduction to equity in earnings of the Unconsolidated Real Estate Entities. Such amortization totaled approximately $0.6 million during each of the nine month periods ended September 30, 2021 and 2020.

PSB is a publicly held entity traded on the New York Stock Exchange under the symbol “PSB”.

Investment in Shurgard

Throughout all periods presented, we effectively owned, directly and indirectly 31,268,459 Shurgard common shares, representing an approximate 35% equity interest in Shurgard.

Based upon the closing price at September 30, 2021 (€47.35 per share of Shurgard common stock, at 1.159 exchange rate of US Dollars to the Euro), the shares we owned had a market value of approximately $1.7 billion.

Our equity in earnings of Shurgard comprised our equity share of Shurgard’s net income, less amortization of the Shurgard Basis Differential (defined below). We eliminated $0.9 million and $0.8 million intra-entity profits and losses for the nine month periods ended September 30, 2021 and 2020, respectively, representing our equity share of

the trademark license fees that Shurgard pays to us for the use of the Shurgard® trademark. We classify the remaining license fees we receive from Shurgard as interest and other income on our income statement.

The dividends we receive from Shurgard, combined with our equity share of trademark license fees collected from Shurgard, are reflected on our statements of cash flows as “distributions from cumulative equity in earnings of unconsolidated real estate entities” to the extent of our cumulative equity in earnings, with any excess classified as “distributions in excess of cumulative equity in earnings from unconsolidated real estate entities.” Shurgard paid €0.57 per share and €0.50 per share in dividends to its shareholders during the nine months ended September 30, 2021 and 2020, respectively, of which our share totaled $21.5 million and $17.0 million, respectively.

At September 30, 2021, our pro-rata investment in Shurgard’s real estate assets included in investment in unconsolidated real estate entities exceeds our pro-rata share of the underlying amounts on Shurgard’s balance sheet by approximately $75.8 million ($83.1 million at December 31, 2020). This differential (the “Shurgard Basis Differential”) includes our cost basis adjustment in Shurgard’s real estate assets net of related deferred income taxes. The real estate assets basis differential is being amortized as a reduction to equity in earnings of the Unconsolidated Real Estate Entities. Such amortization totaled approximately $7.3 million and $9.5 million during the nine month periods ended September 30, 2021 and 2020, respectively.

As of September 30, 2021 and 2020, we translated the book value of our investment in Shurgard from Euro to U.S. Dollar and recorded $9.6 million other comprehensive loss and $2.5 million other comprehensive income during the nine month periods ended September 30, 2021 and 2020, respectively.

Shurgard is a publicly held entity trading on Euronext Brussels under the symbol “SHUR”.