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NONCONTROLLING INTERESTS

3 Months Ended

Mar. 31, 2022

NONCONTROLLING INTERESTS

NONCONTROLLING INTERESTS

13. NONCONTROLLING INTERESTS

Interests in Consolidated Joint Ventures

Noncontrolling interests in subsidiaries represent the ownership interests of third parties in the Company’s consolidated real estate ventures. The following table summarizes the Company’s consolidated joint ventures, each of which are accounted for as VIEs (dollars in thousands):


								CubeSmart
		Number				Date Opened /		Ownership		March 31, 2022
Consolidated Joint Ventures		of Stores		Location		Acquired ⁽¹⁾		Interest		Total Assets			Total Liabilities

										(in thousands)
Astoria Investors, LLC ("Astoria") ⁽²⁾		1		Queens, NY		Q1 2023 (est.)		70%		$	21,165		$	6,559
CS Vienna, LLC ("Vienna") ⁽³⁾		1		Vienna, VA		Q2 2022 (est.)		72%			28,766			17,765
CS 750 W Merrick Rd, LLC ("Merrick") ⁽⁴⁾		1		Valley Stream, NY		Q2 2022 (est.)		51%			35,784			17,544
CS Valley Forge Village Storage, LLC ("VFV") ⁽⁵⁾		1		King of Prussia, PA		Q2 2021		70%			20,923			14,230
CS Lock Up Anoka, LLC ("Anoka") ⁽⁶⁾		1		Anoka, MN		Q2 2021		50%			11,511			5,611
SH3, LLC ("SH3") ⁽⁷⁾		1		Arlington, VA		Q2 2015/Q1 2021		90%			38,655			383
		6								$	156,804		$	62,092

(1)

Anoka was formed to acquire an existing store that had commenced operations, while all other consolidated joint ventures were formed to develop, own and operate new stores.

(2)

On August 17, 2021, the Company contributed $14.7 million in exchange for a 70% ownership interest in Astoria, which acquired land for future development of a self-storage property in Queens, NY for $20.0 million. In addition, as of March 31, 2022, the Company has funded $6.6 million of a $27.1 million related party loan commitment to Astoria, which is included in the total liability amount within the table above. This loan and the related interest were eliminated for consolidation purposes.

(3)

On December 23, 2020, the Company and the noncontrolling member contributed a previously wholly-owned operating property (the “Vienna Operating Property”) and a parcel of land (the “Vienna Land”), respectively, to Vienna. The Vienna Operating Property and the Vienna Land are located in close proximity to each other in Vienna, VA. The members intend to construct a new store on the Vienna Land, which, upon completion, will be combined with the Vienna Operating Property and operated by the venture as a single store. The Company has a related party commitment to Vienna to fund all or a portion of the construction costs. As of March 31, 2022, the Company has funded $16.1 million of a total $17.0 million loan commitment to Vienna, which is included in the total liabilities amount within the table above. This loan and the related interest were eliminated for consolidation purposes.

(4)

The noncontrolling member of Merrick has the option to put their ownership interest in the venture to the Company for $17.1 million (the “Put Option”) within the two-year period after construction of the store is substantially complete (the “Put Option Period”). In the event the Put Option is not exercised, the Company has a one-year option to call the ownership interest of the noncontrolling member for $17.1 million, beginning twelve months after the end of the Put Option Period. The Company, at its sole discretion, may pay cash and/or issue OP Units in exchange for the noncontrolling member’s interest. The Company is accreting this liability during the development period and, as of March 31, 2022, has accrued $15.9 million. This amount is included in Accounts payable, accrued expenses and other liabilities on the Company’s consolidated balance sheets.

(5)

The Company has a related party loan commitment to VFV that was used to fund a portion of the construction costs. As of March 31, 2022, the Company has an outstanding loan of $14.2 million to VFV, which is included in the total liability amounts within the table above. This loan and the related interest were eliminated for consolidation purposes.

(6)

On April 16, 2021, the Company contributed $3.4 million in exchange for a 50% ownership interest in Anoka, which acquired a self-storage property located in Minnesota for $12.0 million. In addition, as of March 31, 2022, the Company has funded $5.5 million of a $6.1 million related party loan commitment to Anoka, which is included in the total liability amount within the table above. This loan and the related interest were eliminated for consolidation purposes.

(7)

SH3 owns two stores located in close proximity to each other in Arlington, VA, the first of which was developed and opened for operation in April 2015 (“Shirlington I”) and the second of which was developed and opened for operation in March 2021 (“Shirlington II”). Given their close proximity to each other, the two stores were combined in our store count, as well as for operational and reporting purposes, upon the opening of Shirlington II in March 2021.

Operating Partnership Ownership

The Company follows guidance regarding the classification and measurement of redeemable securities. Under this guidance, securities that are redeemable for cash or other assets, at the option of the holder and not solely within the control of the issuer, must be classified outside of permanent equity/capital. This classification results in certain outside ownership interests being included as redeemable noncontrolling interests outside of permanent equity/capital in the consolidated balance sheets. The Company makes this determination based on terms in applicable agreements, specifically in relation to redemption provisions.

Additionally, with respect to redeemable ownership interests in the Operating Partnership held by third parties for which CubeSmart has a choice to settle the redemption by delivery of its own shares, the Operating Partnership considered the guidance regarding accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own shares, to evaluate whether CubeSmart controls the actions or events necessary to presume share settlement. The guidance also requires that noncontrolling interests classified outside of permanent capital be adjusted each period to the greater of the carrying value based on the accumulation of historical cost or the redemption value.

Approximately 0.6% and 0.8% of the outstanding OP Units, as of March 31, 2022 and December 31, 2021, respectively, were not owned by CubeSmart, the sole general partner. The interests in the Operating Partnership represented by these OP Units were a component of the consideration that the Operating Partnership paid to acquire certain self-storage properties. The holders of the OP Units are limited partners in the Operating Partnership and have the right to require CubeSmart to redeem all or part of their OP Units for, at the general partner’s option, an equivalent number of common shares of CubeSmart or cash based upon the fair value of an equivalent number of common shares of CubeSmart. However, the partnership agreement contains certain provisions that could result in a settlement outside the control of CubeSmart and the Operating Partnership, as CubeSmart does not have the ability to settle in unregistered shares. Accordingly, consistent with the guidance, the Operating Partnership will record the OP Units owned by third parties outside of permanent capital in the consolidated balance sheets. Net income or loss related to the OP Units owned by third parties is excluded from net income or loss attributable to Operating Partner in the consolidated statements of operations.

As of March 31, 2022 and December 31, 2021, 1,460,520 and 1,901,595 OP units, respectively, were held by third parties. The per unit cash redemption amount of the outstanding OP units was calculated based upon the closing price of the common shares of CubeSmart on the New York Stock Exchange on the final trading day of the quarter. Based on the Company’s evaluation of the redemption value of the redeemable noncontrolling interest, the Company has reflected these interests at the greater of the carrying value based on the accumulation of historical cost or the redemption value at March 31, 2022 and December 31, 2021. As of March 31, 2022, the Operating Partnership recorded a decrease in the value of OP Units owned by third parties and a corresponding increase to capital of $10.4 million. As of December 31, 2021, the Operating Partnership recorded an increase in the value of OP Units owned by third parties and a corresponding decrease to capital of $164.1 million.