INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURE

6 Months Ended

Jun. 30, 2015

INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURE

INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURE

5. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURE

On December 10, 2013, the Company acquired a 50% ownership interest in 35 self-storage facilities located in Texas (34) and North Carolina (1) through a newly-formed joint venture (“HHF”). HHF paid $315.7 million for these facilities, of which $12.1 million was allocated to the value of the in-place lease intangible. The Company and the unaffiliated joint venture partner (collectively the “HHF Partners”), each contributed cash equal to 50% of the capital required to fund the acquisition. HHF was not consolidated as the entity was not determined to be a variable interest entity (“VIE”) and the HHF Partners have equal ownership and voting rights in the entity. The Company accounts for its unconsolidated interest in the real estate venture using the equity method. The Company’s investment in HHF is included in Investment in real estate venture, at equity on the Company’s consolidated balance sheets and losses attributed to HHF are presented in Equity in losses of real estate ventures on the Company’s consolidated statements of operations.

On May 1, 2014, HHF obtained a $100 million loan secured by the 34 self-storage facilities located in Texas that are owned by the venture. There is no recourse to the Company, subject to customary exceptions to non-recourse provisions. The loan bears interest at 3.59% per annum and matures on April 30, 2021. This financing completed the planned capital structure of HHF and proceeds (net of closing costs) of $99.2 million were distributed proportionately to the partners.

The amounts reflected in the following table are based on the historical financial information of the real estate venture.

The following is a summary of the financial position of the HHF venture as of June 30, 2015 and December 31, 2014 (in thousands):


	June 30,		December 31,
	2015		2014
Assets
Storage facilities, net	$	284,665	$	291,357
Other assets		4,447		5,786
Total assets	$	289,112	$	297,143

Liabilities and equity
Other liabilities	$	4,370	$	5,725
Debt		100,000		100,000
Equity
CubeSmart		92,371		95,709
Joint venture partner		92,371		95,709
Total liabilities and equity	$	289,112	$	297,143

The following is a summary of results of operations of the real estate venture for the three and six months ended June 30, 2015 and 2014 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014

Total revenues	$	7,465	$	6,500	$	14,525	$	13,020
Operating expenses		3,174		2,842		6,227		5,621
Interest expense, net		931		610		1,862		610
Depreciation and amortization		3,560		6,506		7,112		12,985
Net loss		(200)		(3,458)		(676)		(6,196)
Company’s share of net loss		(100)		(1,729)		(338)		(3,098)