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INVESTMENT ACTIVITY | 9 Months Ended
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Sep. 30, 2022
INVESTMENT ACTIVITY |
INVESTMENT ACTIVITY | 4. INVESTMENT ACTIVITY ​ 2022 Acquisitions ​ During the nine months ended September 30, 2022, the Company acquired three stores located in Georgia (1), Maryland (1) and Texas (1) for an aggregate purchase price of $75.7 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 $3.4 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 three and nine months ended September 30, 2022 was approximately $0.9 million and $1.4 million, respectively. ​ Additionally, on February 2, 2022, the Company acquired land underlying a wholly-owned store located in Bronx, New York for $7.5 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 $4.1 million and $5.0 million, respectively, were removed from the Company’s consolidated balance sheets. ​ Also, on April 28, 2022, the Company acquired land underlying a store owned by 191 IV CUBE LLC, an unconsolidated joint venture in which the Company holds a 20% ownership interest (see note 5). The purchase price for the land was $6.1 million, and the Company now serves as the lessor in a ground lease of the land to 191 IV CUBE LLC. ​ 2022 Dispositions ​ During the nine months ended September 30, 2022, the Company sold the Los Angeles Athletic Club, which it purchased in December 2021 as part of the LAACO acquisition, for $44.0 million. No gain or loss was recognized in conjunction with the sale. ​ 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 (the “CYC”) (consisting of sports facilities, food and beverage operations and a marina). During the nine months ended September 30, 2022, the Company sold the Los Angeles Athletic Club (see above). As of September 30, 2022, the CYC is 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 | $ | 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. Amounts of $10.3 million were included in the component of other income (expense) designated as other for the nine months ended September 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 three and nine months ended September 30, 2022 was approximately $27.4 million and $82.2 million, respectively. ​ Other 2021 Acquisitions ​ During the year ended December 31, 2021, the Company also 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. In addition, 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 13). 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 three and nine months ended September 30, 2022 was approximately $1.7 million and $7.5 million, respectively. ​ 2021 Dispositions ​ During the year ended December 31, 2021, the Company sold five properties located 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 September 30, 2022, the Company determined that the CYC met the criteria to be classified as held for sale. Accordingly, the assets and liabilities associated with the CYC have been categorized as held for sale within the Company’s consolidated balance sheets. As of September 30, 2022, the estimated fair value less selling costs of the CYC was greater than the carrying value of the CYC, and therefore no loss has been recorded in the current period. ​ Development Activity ​ As of September 30, 2022, the Company had an investment in a joint venture to develop one self-storage property located in New York. Construction for this project is expected to be completed by the fourth quarter of 2023 (see note 13). As of September 30, 2022, development costs incurred to date for this project totaled $22.3 million. Total construction costs for this project are expected to be $46.2 million. These costs are capitalized to construction in progress while the project is under development and are reflected in Storage properties on the Company’s consolidated balance sheets. ​ The Company has completed the construction and opened for operation the following stores during the period January 1, 2021 through September 30, 2022. 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)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Valley Stream, NY | ​ | 1 | ​ | Q3 2022 | ​ | 51% | ​ | $ | 39,000
Vienna, VA (1) | ​ | 1 | ​ | Q2 2022 | ​ | 80% | ​ | ​ | 21,800
Newton, MA (2) | ​ | 1 | ​ | Q4 2021 | ​ | 100% | ​ | ​ | 20,800
East Meadow, NY (3) | ​ | 1 | ​ | Q2 2021 | ​ | 100% | ​ | ​ | 25,900
King of Prussia, PA | ​ | 1 | ​ | Q2 2021 | ​ | 70% | ​ | ​ | 22,800
Arlington, VA (1) | ​ | 1 | ​ | Q1 2021 | ​ | 90% | ​ | ​ | 26,400
​ | ​ | 6 | ​ | ​ | ​ | ​ | ​ | $ | 156,700
​
| (1) | Each of these stores are located adjacent to an existing consolidated joint venture store. Given this proximity, each of these stores has been combined with the adjacent existing store in our store count upon opening, as well as for operational and reporting purposes (see note 13).
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| (2) | During the fourth quarter of 2021, the Company, through a joint venture in which it owned a 90% interest that was previously consolidated, completed the construction of this store and it was opened for operation. On December 14, 2021, the Company acquired the 10% interest of the noncontrolling member in the venture that owned the store for $3.4 million. Prior to this transaction, the noncontrolling member’s interest in the venture was reported in Noncontrolling interests in subsidiaries on the consolidated balance sheets. Since the Company retained its controlling interest in the venture and the store is now wholly owned, this transaction was accounted for as an equity transaction. 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 of $2.7 million was recorded as an adjustment to equity attributable to the Company, with no gain or loss recorded. The $13.2 million related party loan extended by the Company to the venture that owned the store was repaid in conjunction with the Company’s acquisition of the noncontrolling member’s ownership interest.
​
| (3) | This store was previously owned by a consolidated joint venture, in which the Company held a 51% ownership interest. On June 29, 2021, the noncontrolling member in the venture that owned the store put its 49% interest in the venture to the Company for $6.6 million in cash consideration.

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