XML 29 R12.htm IDEA: XBRL DOCUMENT

INVESTMENT ACTIVITY

12 Months Ended

Dec. 31, 2021

4. INVESTMENT ACTIVITY

LAACO Acquisition

On December 9, 2021, the Company acquired all outstanding partnership units of LAACO, the owner of the Storage West Assets and, as a result, LAACO became a wholly-owned subsidiary of the Company. The 57 Storage West Assets are located in Arizona (17), California (20), Nevada (13) and Texas (7). Through its acquisition of LAACO, the Company also acquired a 50% interest in two separate unconsolidated joint ventures, each of which own one storage property in California (see note 5). In addition, through this acquisition, the Company also acquired the Club Operations, which included the Los Angeles Athletic Club (consisting of athletic facilities, food and beverage operations and a hotel) and the California Yacht Club (consisting of sports facilities, food and beverage operations and a marina). As of December 31, 2021, the Club Operations have been classified as held for sale on the Company’s consolidated balance sheets.

The following summarizes the relevant components contemplated in the acquisition of LAACO:


	Amount
	(in thousands)
Costs contemplated:
Capitalized costs:
LAACO partnership units ⁽¹⁾	$	1,648,426
Long-term debt assumed and repaid at closing		40,880
Payments to LAACO management (capitalized) ⁽²⁾		16,807
Other transaction costs ⁽³⁾		13,407
Total capitalized costs	$	1,719,520
Payments and anticipated payments to LAACO management (expensed) ⁽²⁾		25,144
Total costs contemplated	$	1,744,664

Estimated fair value of Club Operations (included in total costs contemplated above)	$	46,800

(1)

Represents the acquisition of all 167,557 outstanding partnership units for $9,838 per unit.

(2)

Upon the acquisition of LAACO, the Company assumed severance obligations payable to certain employees pursuant to pre-existing agreements. Based on the specific details of the arrangements, $16.8 million in costs were capitalized to the basis of the acquired properties while $25.1 million were considered post-combination compensation expenses. Of this $25.1 million, $14.8 million was included in the component of other income (expense) designated as other for the year ended December 31, 2021, with the remainder expected to be expensed during the six months ended June 30, 2022.

(3)

Includes consulting fees, legal fees, and other costs.

The Company accounted for the acquisition of LAACO as an asset acquisition. As a result, the capitalized costs noted above were allocated to LAACO’s real estate assets, intangible assets and real estate venture investments on a relative fair value basis. All other assets acquired and liabilities assumed were recorded at fair value. The following summarizes the accounting for the LAACO acquisition:


	Amount
	(in thousands)
Storage properties	$	1,517,243
Cash and cash equivalents		18,291
Investment in real estate ventures, at equity		35,737
Assets held for sale		50,435
Other assets, net		143,599
Accounts payable, accrued expenses and other liabilities		(38,350)
Deferred revenue		(3,764)
Security deposits		(36)
Liabilities held for sale		(3,635)
Total	$	1,719,520

Intangible assets (included above in Other assets, net) consisted of in-place leases, which aggregated to $109.7 million at the time of the acquisition and prior to amortization of such amounts. The estimated life of these in-place leases is 12 months and the amortization expense that was recognized during the year ended December 31, 2021 was approximately $9.1 million.

Other 2021 Acquisitions

During the year ended December 31, 2021, the Company acquired eight additional stores located in Florida (1), Georgia (1), Illinois (1), Maryland (1), Nevada (1), New Jersey (1) and Pennsylvania (2) for an aggregate purchase price of approximately $140.8 million. Also, a consolidated joint venture, in which the Company holds a 50% interest, acquired a store in Minnesota for a purchase price of $12.0 million (see note 12). In connection with these transactions, which were accounted for as asset acquisitions, the Company allocated the purchase price and acquisition-related costs to the tangible and intangible assets acquired based on fair value. Intangible assets consisted of in-place leases, which aggregated to $11.9 million at the time of the acquisitions and prior to amortization of such amounts. The estimated life of these in-place leases is 12 months and the amortization expense that was recognized during the year ended December 31, 2021 was approximately $3.6 million.

As of December 31, 2021, the Company had made aggregate deposits of approximately $0.5 million associated with one store that was under contract to be acquired for an acquisition price of $32.0 million (see note 18). The deposits are reflected in Other assets, net on the Company’s consolidated balance sheets.

2021 Dispositions

During the year ended December 31, 2021, the Company sold five stores in Colorado (1), Nevada (1), North Carolina (2) and Texas (1) for an aggregate sales price of $43.8 million. In conjunction with the sales, the Company recorded gains that totaled $32.7 million.

Assets Held for Sale

As of December 31, 2021, the Company determined that the Club Operations assumed through the acquisition of LAACO met the criteria to be classified as assets held for sale. Accordingly, the assets and liabilities associated with the Club Operations have been categorized as held for sale within the Company’s December 31, 2021 consolidated balance sheets. As of December 31, 2021, the estimated fair value less selling costs of the Club Operations was greater than the carrying value of the Club Operations, and therefore no loss has been recorded in the current period.

Development Activity

As of December 31, 2021, the Company had invested in joint ventures to develop three self-storage properties located in New York (2) and Virginia (1). Construction for all projects is expected to be completed by the first quarter of 2023 (see note 12). As of December 31, 2021, development costs incurred to date for these projects totaled $66.7 million. Total construction costs for these projects are expected to be $97.3 million. These costs are capitalized to construction in progress while the projects are under development and are reflected in Storage properties on the Company’s consolidated balance sheets.

The Company has completed the construction of and opened for operation the following stores since January 1, 2019. The costs associated with the construction of these stores are capitalized to land, building and improvements, as well as equipment and are reflected in Storage properties on the Company’s consolidated balance sheets.


			CubeSmart
	Number of		Ownership	Total
Store Location	Stores	Date Opened	Interest	Construction Costs
				(in thousands)

Newton, MA ⁽¹⁾	1	Q4 2021	100%	$	20,800
East Meadow, NY ⁽²⁾	1	Q2 2021	100%		25,900
King of Prussia, PA	1	Q2 2021	70%		22,800
Arlington, VA ⁽³⁾	1	Q1 2021	90%		26,400
Brooklyn, NY ⁽²⁾	1	Q2 2020	100%		45,900
Waltham, MA⁽¹⁾	1	Q3 2019	100%		18,000
Queens, NY⁽²⁾	1	Q2 2019	100%		47,500
Bayonne, NJ ^{(2) (4)}	1	Q2 2019	100%		25,100
	8			$	232,400

(1)

During the third quarter of 2019 and fourth quarter of 2021, the Company, through two separate joint ventures in which it owned a 90% interest in each and that were previously consolidated, completed the construction of and opened for operation a store located in Waltham, MA and a store located in Newton, MA, respectively. On September 6, 2019, the Company acquired the 10% interest of the noncontrolling member in the venture that owned the Waltham, MA store for $2.6 million. On December 14, 2021, the Company acquired the 10% interest of the noncontrolling member in the venture that owned the Newton, MA store for $3.4 million. Prior to these transactions, the noncontrolling member’s interest in each venture was reported in Noncontrolling interests in subsidiaries on the consolidated balance sheets. Since the Company retained its controlling interest in each venture and the stores are now wholly owned, these transactions were accounted for as equity transactions. In each case, the carrying amount of the noncontrolling interest was reduced to zero to reflect the purchase and the difference between the purchase price paid by the Company and the carrying amount of the noncontrolling interest was recorded as an adjustment to equity attributable to the Company, with no gain or loss recorded. This adjustment was $2.0 million for the Waltham, MA store and $2.7 million for the Newton, MA store. The $10.5 million related party loan extended by the Company to the venture that owned the Waltham, MA store and the $13.2 million related party loan extended by the Company to the venture that owned the Newton, MA store were repaid in conjunction with the Company’s acquisitions of the noncontrolling member’s ownership interests.

(2)

These stores were previously owned by four separate consolidated joint ventures, of which the Company held a 51% ownership interest in each. On June 25, 2019, the noncontrolling member in the venture that owned the Bayonne, NJ store put its 49% interest in the venture to the Company for $11.5 million. On September 17, 2019, the noncontrolling member in the venture that owned the Queens, NY store put its 49% interest in the venture to the Company for $15.2 million. On September 29, 2020, the noncontrolling member in the venture that owned the Brooklyn, NY store put its 49% interest in the venture to the Company for $10.0 million, of which $1.0 million was paid in cash. The Company issued 276,497 OP Units that were valued at approximately $9.0 million as consideration for the remainder of the purchase price (see note 12). On June 29, 2021, the noncontrolling member in the venture that owned the East Meadow, NY store put its 49% interest in the venture to the Company for $6.6 million. The cash payments related to these transactions are included in Development costs in the consolidated statements of cash flows.

(3)

This store is located adjacent to an existing consolidated joint venture store. Given their proximity to each other, the stores have been combined in our store count, as well as for operational and reporting purposes (see note 12).

(4)

This store is subject to a ground lease.

2020 Acquisitions

The Company acquired a portfolio of eight stores located in the outer boroughs of New York City (the “Storage Deluxe Assets”), in two separate tranches during December 2020, for an aggregate purchase price of $540.0 million. In connection with the acquisition of the Storage Deluxe Assets, the Company assumed six mortgage loans with an aggregate outstanding principal amount of $154.4 million at the time of acquisition, one of which had an outstanding principal balance of $33.2 million and was repaid immediately. The assumed mortgage debt was recorded at a fair value of $169.2 million, which includes an aggregate net premium of $14.8 million to reflect the estimated fair value of the debt at the time of assumption. The remainder of the purchase price was funded with $210.5 million of cash and $175.1 million through the issuance of 5,272,023 OP Units (see note 12). In connection with the acquisition of the Storage Deluxe Assets, which was accounted for as an asset acquisition, the Company allocated the purchase price and acquisition related costs to the tangible and intangible assets acquired based on fair value. Intangible assets consisted of in-place leases, which aggregated to $48.6 million at the time of the acquisition and prior to amortization of such amounts. The estimated life of these in-place leases was 12 months and the amortization expense that was recognized during the year ended December 31, 2021 was approximately $48.6 million. Additionally, as part of the transaction, the Company assumed three existing ground leases as lessee, two of which have been classified as finance leases and one of which has been classified as an operating lease (see note 13).

During the year ended December 31, 2020, the Company acquired 13 additional stores located in Florida (5), Maryland (1), Nevada (1), New Jersey (1), New York (1), Texas (3) and Virginia (1) for an aggregate purchase price of approximately $195.9 million. In connection with these transactions, which were accounted for as asset acquisitions, the Company allocated the purchase price and acquisition related costs to the tangible and intangible assets acquired based on fair value. Intangible assets consisted of in-place leases, which aggregated to $11.4 million at the time of the acquisitions and prior to amortization of such amounts. The estimated life of these in-place leases was 12 months and the amortization expense that was recognized during the years ended December 31, 2021 and 2020 was approximately $9.3 million and $2.1 million, respectively.

Additionally, on July 20, 2020, the Company acquired land underlying a wholly-owned store located in the Bronx, New York for $9.5 million. The land was previously subject to a ground lease in which the Company served as lessee. As a result of the transaction, which was accounted for as an asset acquisition, the Company was released from its obligations under the ground lease, and the right-of-use asset and lease liability totaling $5.1 million and $5.0 million, respectively, were removed from the Company’s consolidated balance sheets.

2020 Disposition

On December 22, 2020, the Company sold a self-storage property located in New York for a sales price of $12.8 million. The Company recorded a $6.7 million gain in connection with the sale.

2019 Acquisitions

During the year ended December 31, 2019, the Company acquired 11 stores located in Arizona (1), California (1), Florida (5), Georgia (1), Maryland (1), South Carolina (1) and Texas (1) for an aggregate purchase price of approximately $118.3 million. In connection with these transactions, which were accounted for as asset acquisitions, the Company allocated the purchase price and acquisition related costs to the tangible and intangible assets acquired based on fair value. Intangible assets consisted of in-place leases, which aggregated to $6.2 million at the time of the acquisitions and prior to amortization of such amounts. The estimated life of these in-place leases was 12 months and the amortization expense that was recognized during the years ended December 31, 2020 and 2019 was approximately $4.3 million and $1.9 million, respectively. There was no amortization expense recognized during the year ended December 31, 2021 for these in-place leases. In connection with one of the acquisitions, the Company paid $14.9 million of cash and issued OP Units that were valued at approximately $3.6 million as consideration for the purchase price (see note 12).

Additionally, on June 6, 2019, the Company acquired its partner’s 90% ownership interest in HVP III, an unconsolidated real estate venture in which the Company previously owned a 10% noncontrolling interest and that was accounted for under the equity method of accounting. As of the date of acquisition, HVP III owned 18 stores located in Georgia (1), Massachusetts (7), North Carolina (1), South Carolina (7) and Tennessee (2) (the “HVP III Assets”). The purchase price for the 90% ownership interest was $128.3 million, which was comprised of cash consideration of $120.0 million and $8.3 million of the Company’s escrowed proceeds from HVP III’s sale of 50 properties to an unaffiliated buyer on June 5, 2019 (see note 5). The HVP III Assets were recorded by the Company at $137.5 million, which consisted of the $128.3 million purchase price plus the Company’s $10.6 million carryover basis of its previously held equity interest in HVP III, offset by $1.4 million of acquired cash. As a result of the transaction, which was accounted for as an asset acquisition, the HVP III Assets became wholly-owned by the Company and are now consolidated within its financial statements. No gain or loss was recognized as a result of the transaction. In connection with the transaction, the Company allocated the value of the HVP III

Assets and acquisition related costs to the tangible and intangible assets acquired based on fair value. Intangible assets consisted of in-place leases, which aggregated to $14.3 million at the time of the acquisition and prior to amortization of such amounts. The estimated life of these in-place leases was 12 months and the amortization expense that was recognized during the years ended December 31, 2020 and 2019 was approximately $6.0 million and $8.3 million, respectively. There was no amortization expense recognized for these in-place leases during the year ended December 31, 2021.

2019 Disposition

On October 7, 2019, the Company sold a self-storage property located in Texas for a sales price of $4.1 million. The Company recorded a $1.5 million gain in connection with the sale.