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INVESTMENT ACTIVITY
 6 Months Ended
Jun. 30, 2015
INVESTMENT ACTIVITY  
INVESTMENT ACTIVITY

4. INVESTMENT ACTIVITY

 

2015 Acquisitions

 

During 2014, the Operating Partnership entered into an Agreement for Purchase and Sale with certain limited liability companies controlled by HSRE REIT I and HSRE REIT II, both Maryland real estate investment trusts, to acquire (the “HSRE Acquisition”) 26 self-storage facilities for an aggregate purchase price of $223.0 million plus customary closing costs. During 2014, the Company closed on the first tranche of 22 facilities comprising the HSRE Acquisition, for an aggregate purchase price of $195.5 million. On March 18, 2015, the Company closed on the second tranche of the remaining four self-storage facilities comprising the HSRE Acquisition, for an aggregate purchase price of $27.5 million. The four facilities purchased in the second tranche are located in Illinois. In connection with this acquisition, the Company allocated a portion of the purchase price to the intangible value of in-place leases, which aggregated to $2.7 million at the time of the acquisition and prior to any amortization of such amounts. The estimated life of these in-place leases was 12 months, and the amortization expense that was recognized during the six months ended June 30, 2015 was approximately $0.7 million. 

 

During the six months ended June 30, 2015, the Company acquired seven additional self-storage facilities, including one facility upon completion of construction and the issuance of a certificate of occupancy, located throughout the United States for an aggregate purchase price of approximately $65.5 million. In connection with these acquisitions, the Company allocated a portion of the purchase price to the intangible value of in-place leases, which aggregated $3.8 million at the time of the acquisitions and prior to any amortization of such amounts. The estimated life of these in-place leases was 12 months, and the amortization expense that was recognized during the six months ended June 30, 2015 was approximately $0.5 million. In connection with one of the acquired facilities, the Company assumed mortgage debt that was recorded at a fair value of $2.7 million, which fair value includes an outstanding principal balance totaling $2.5 million and a net premium of $0.2 million to reflect the estimated fair value of the debt at the time of assumption.

 

As of June 30, 2015, the Company was under contract and had made aggregate deposits of $5.1 million associated with four facilities under construction for a total purchase price of $90.2 million. In connection with one of the facilities, the Company provided a $4.1 million loan for the purpose of acquiring the premises on which the facility will be built. The deposits and note receivable are reflected in Other assets, net on the Company’s consolidated balance sheets. The purchase of these four facilities is expected to occur by the fourth quarter of 2016 after the completion of construction and the issuance of a certificate of occupancy. These acquisitions are subject to due diligence and other customary closing conditions and no assurance can be provided that these acquisitions will be completed on the terms described, or at all.

 

Development

 

At June 30, 2015, the Company had five contracts through joint ventures for the construction of four self-storage facilities located in New York (see note 12) and one self-storage facility located in Washington, D.C. Construction for all projects is expected to be completed by the third quarter of 2016. At June 30, 2015, development costs for these projects totaled $71.8 million. These costs are capitalized to construction in progress while the projects are under evelopment and are reflected in Storage facilities on the Company’s consolidated balance sheets.

 

During the second quarter of 2015, the Company, through a joint venture in which the Company owns a 90% interest, completed the construction of a self-storage facility located in Arlington, VA and opened for operation. Total costs for this project were $17.1 million at June 30, 2015. These costs are capitalized to land, building and improvements as well as equipment and are reflected in Storage facilities on the Company’s consolidated balance sheets.

 

During the first quarter of 2014, the Company completed the construction of a self-storage facility subject to a ground lease located in Bronx, NY and opened for operation. Total costs for this project were $17.2 million. These costs are capitalized to building and improvements as well as equipment and are reflected in Storage facilities on the Company’s consolidated balance sheets.

 

During the fourth quarter of 2013, the Company completed the construction of the portion of a mixed-use facility comprised of office space and self-storage and relocated its corporate headquarters to 5 Old Lancaster Road in Malvern, PA, a suburb of Philadelphia. During the first quarter of 2014, construction was completed on the portion of the building comprised of rentable storage space and the facility opened for operation. Total costs for this mixed-use project were $25.1 million.

 

2014 Acquisitions

 

On November 3, 2014, the Company closed on the first tranche of 22 self-storage facilities comprising the HSRE Acquisition, for an aggregate purchase price of $195.5 million. The 22 self-storage facilities purchased are located in California, Florida, Illinois, Nevada, New York, Ohio and Rhode Island. In connection with this acquisition, the Company allocated a portion of the purchase price to the intangible value of in-place leases, which aggregated to $14.5 million at the time of the acquisition and prior to any amortization of such amounts. The estimated life of these in-place leases was 12 months, and the amortization expense that was recognized during the six months ended June 30, 2015 was approximately $7.2 million. 

 

During 2014, the Company acquired 31 additional self-storage facilities located throughout the United States for an aggregate purchase price of approximately $372.7 million. In connection with these acquisitions, the Company allocated a portion of the purchase price to the intangible value of in-place leases, which aggregated $23.8 million at the time of such acquisitions and prior to any amortization of such amounts. The estimated life of these in-place leases was 12 months, and the amortization expense that was recognized during the six months ended June 30, 2015 was approximately $8.1 million. In connection with four of the acquired facilities, the Company assumed mortgage debt that was recorded at a fair value of $27.5 million, which fair value includes an outstanding principal balance totaling $26.0 million and a net premium of $1.5 million to reflect the estimated fair value of the debt at the time of assumption.

 

The following table summarizes the Company’s revenue and earnings associated with the 2015 and 2014 acquisitions from the respective acquisition dates in the period they were acquired, included in the consolidated statements of operations for the three and six months ended June 30, 2015 and 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

 

 

    

2015

    

2014

 

2015

    

2014

 

 

 

(in thousands)

 

Total revenue

 

$
1,524

 

$
3,843

 

$
1,743

 

$
5,200

 

Net loss

 

 
(1,146)

 

 
(2,115)

 

 
(1,124)

 

 
(2,914)