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INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES | 9 Months Ended
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Sep. 30, 2022
INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES |
INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES | 5. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES ​ The Company’s investments in unconsolidated real estate ventures are summarized as follows (dollars in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | CubeSmart | ​ | Number of Stores as of | ​ | Carrying Value of Investment as of
​ | ​ | Ownership | ​ | September 30, | ​ | December 31, | ​ | September 30, | ​ | December 31,
Unconsolidated Real Estate Ventures |  | Interest | ​ | 2022 | ​ | 2021 |  | 2022 | ​ | 2021
Fontana Self Storage, LLC ("Fontana") (1) | ​ | 50% | ​ | 1 | ​ | 1 | ​ | $ | 13,929 | ​ | $ | 14,225
Rancho Cucamonga Self Storage, LLC ("RCSS") (1) | ​ | 50% | ​ | 1 | ​ | 1 | ​ | ​ | 21,159 | ​ | ​ | 21,536
191 V CUBE LLC ("HVP V") (2) | ​ | 20% | ​ | 6 | ​ | 5 | ​ | ​ | 14,703 | ​ | ​ | 16,080
191 IV CUBE Southeast LLC ("HVPSE") (3) | ​ | 10% | ​ | - | ​ | 14 | ​ | ​ | — | ​ | ​ | 4,541
191 IV CUBE LLC ("HVP IV") (4) | ​ | 20% | ​ | 28 | ​ | 28 | ​ | ​ | 20,488 | ​ | ​ | 23,223
CUBE HHF Northeast Venture LLC ("HHFNE") (5) | ​ | 10% | ​ | 13 | ​ | 13 | ​ | ​ | 1,158 | ​ | ​ | 1,291
CUBE HHF Limited Partnership ("HHF") (6) | ​ | 50% | ​ | 28 | ​ | 28 | ​ | ​ | 36,318 | ​ | ​ | 38,855
​ | ​ | ​ | ​ | 77 | ​ | 90 | ​ | $ | 107,755 | ​ | $ | 119,751
​
| (1) | On December 9, 2021, the Company completed the acquisition of LAACO, which included a 50% interest in Fontana and RCSS, each of which owns one self-storage property in California. As of the date of acquisition, the Company recognized differences between the Company’s equity investment in Fontana and RCSS and the
|  | underlying equity reflected at the venture level. As of September 30, 2022, this difference was $13.2 million and $19.7 million for Fontana and RCSS, respectively. These differences are being amortized over the expected useful life of the self-storage properties owned by the ventures.
​
| (2) | The stores owned by HVP V are located in Florida (2), New Jersey (3) and New York (1). HVP V paid an aggregate of $176.9 million for these properties, of which $2.2 million was allocated to the value of the in-place leases. These acquisitions were funded through pro-rata contributions by the Company and its unaffiliated joint venture partner as well as by the venture’s secured term loan. The Company’s total contribution to HVP V related to these acquisitions was $22.7 million. As of September 30, 2022, HVP V had an outstanding $101.8 million secured term loan, which bears interest at the Secured Overnight Financing Rate (“SOFR”) plus 2.05% and matures on September 30, 2025 with an option to extend the maturity date through September 30, 2026, subject to satisfaction of certain conditions and payment of the extension fees as stipulated in the loan agreement.
​
| (3) | On August 30, 2022, HVPSE sold all 14 of its stores to an unaffiliated third-party buyer for an aggregate sales price of $235.0 million. These stores were located in Florida (2), Georgia (8) and South Carolina (4). As of the transaction date, HVPSE had an $81.6 million secured term loan, which was repaid in full at the time of the sale. Net proceeds to the venture from the transaction totaled $150.1 million, of which $49.9 million were distributed to the Company. The venture recorded gains which aggregated to approximately $114.1 million in connection with the sale. As of September 30, 2022, the venture retained cash of $3.5 million to pay venture-level expenses. After such expenses are paid, any remaining proceeds will be distributed to the venture’s partners per the terms of the operating agreement.
​
| (4) | The stores owned by HVP IV are located in Arizona (2), Connecticut (3), Florida (4), Georgia (2), Illinois (5), Maryland (2), Minnesota (1), Pennsylvania (1) and Texas (8). The Company’s total contribution to HVP IV in connection with these store acquisitions was $32.0 million. As of September 30, 2022, HVP IV had an outstanding $221.6 million secured loan, which bears interest at LIBOR plus 1.95% per annum, and matures on April 19, 2025.
​
| (5) | The stores owned by HHFNE are located in Connecticut (3), Massachusetts (6), Rhode Island (2) and Vermont (2). The Company’s total contribution to HHFNE in connection with these store acquisitions was $3.8 million. As of September 30, 2022, HHFNE had an outstanding $45.0 million secured loan facility, which bears interest at LIBOR plus 1.20% per annum and matures on December 16, 2024.
​
| (6) | The stores owned by HHF are located in North Carolina (1) and Texas (27). On October 5, 2021, HHF sold seven stores in Texas for an aggregate sales price of approximately $85.0 million. The venture recorded gains which aggregated to approximately $46.9 million in connection with the sale. As of September 30, 2022, HHF had an outstanding $105.0 million secured loan, which bears interest at a fixed rate of 2.58% per annum and matures on February 5, 2028.
​ Based upon the facts and circumstances at acquisition of Fontana and RCSS and formation of HVP V, HVPSE, HVP IV, HHFNE and HHF (the “Ventures”), the Company determined that the Ventures are not VIEs in accordance with the accounting standard for the consolidation of VIEs. As a result, the Company used the voting interest model under the accounting standard for consolidation in order to determine whether to consolidate the Ventures. Based upon each member's substantive participating rights over the activities of each entity as stipulated in the operating agreements, the Ventures are not consolidated by the Company and are accounted for under the equity method of accounting. The Company’s investments in the Ventures are included in Investment in real estate ventures, at equity on the Company’s consolidated balance sheets and the Company’s earnings from its investments in the Ventures are presented in Equity in earnings of real estate ventures on the Company’s consolidated statements of operations. ​ The following is a summary of the financial position of the Ventures as of September 30, 2022 and December 31, 2021. ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | September 30, | ​ | December 31,
​ | ​ | 2022 |  | 2021
Assets | ​ | (in thousands)
Storage properties, net | ​ | $ | 747,745 | ​ | $ | 850,250
Other assets | ​ |  | 17,362 | ​ |  | 34,760
Total assets | ​ | $ | 765,107 | ​ | $ | 885,010
​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities and equity | ​ | ​ | ​ | ​ | ​ | ​
Debt | ​ | $ | 468,335 | ​ | $ | 526,972
Other liabilities | ​ | ​ | 22,240 | ​ | ​ | 14,500
Equity | ​ | ​ | ​ | ​ | ​ | ​
CubeSmart | ​ |  | 74,836 | ​ | ​ | 86,083
Joint venture partners | ​ |  | 199,696 | ​ | ​ | 257,455
Total liabilities and equity | ​ | $ | 765,107 | ​ | $ | 885,010
​ | ​ | ​ | ​ | ​ | ​ | ​
​ The following is a summary of results of operations of the Ventures for the three and nine months ended September 30, 2022 and 2021. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended September 30, | ​ | Nine Months Ended September 30,
​ |  | 2022 |  | 2021 |  | 2022 | ​ | 2021
​ | ​ | (in thousands)
Total revenues | ​ | $ | 26,915 | ​ | $ | 24,273 | ​ | $ | 78,511 | ​ | $ | 64,337
Operating expenses | ​ |  | (11,340) | ​ | ​ | (10,368) | ​ |  | (33,321) | ​ |  | (28,464)
Other expenses | ​ | ​ | (137) | ​ | ​ | (138) | ​ | ​ | (375) | ​ | ​ | (988)
Interest expense, net | ​ |  | (4,225) | ​ | ​ | (2,714) | ​ |  | (11,678) | ​ |  | (8,922)
Depreciation and amortization | ​ |  | (9,124) | ​ |  | (9,719) | ​ |  | (29,052) | ​ |  | (27,439)
Gains from sale of real estate, net | ​ | ​ | 114,107 | ​ | ​ | — | ​ | ​ | 114,107 | ​ | ​ | —
Net income (loss) | ​ | $ | 116,196 | ​ | $ | 1,334 | ​ | $ | 118,192 | ​ | $ | (1,476)
Company’s share of net income (loss) | ​ | $ | 46,558 | ​ | $ | 816 | ​ | $ | 47,532 | ​ | $ | 1,152
​

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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