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NONCONTROLLING INTERESTS

9 Months Ended

Sep. 30, 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		September 30, 2022
Consolidated Joint Ventures		of Stores		Location		Acquired ⁽¹⁾		Interest		Total Assets			Total Liabilities

										(in thousands)
Astoria Investors, LLC ("Astoria") ⁽²⁾		1		Queens, NY		Q4 2023 (est.)		70%		$	22,595		$	7,991
CS 750 W Merrick Rd, LLC ("Merrick") ⁽³⁾		1		Valley Stream, NY		Q3 2022		51%			37,625			17,255
CS Vienna, LLC ("Vienna") ⁽⁴⁾		1		Vienna, VA		Q2 2022		80%			32,944			35,160
CS Valley Forge Village Storage, LLC ("VFV") ⁽⁵⁾		1		King of Prussia, PA		Q2 2021		70%			20,667			14,633
CS Lock Up Anoka, LLC ("Anoka") ⁽⁶⁾		1		Anoka, MN		Q2 2021		50%			11,141			5,615
SH3, LLC ("SH3") ⁽⁷⁾		1		Arlington, VA		Q2 2015/Q1 2021		90%			38,141			262
		6								$	163,113		$	80,916

(1)

All consolidated joint ventures were formed to develop, own and operate new stores with the exception of Anoka, which was formed to acquire an existing store that had commenced operations.

(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. As of September 30, 2022, the Company has funded $7.7 million of a $27.1 million related party loan commitment to Astoria, which is included in total liabilities within the table above. This loan and the related interest were eliminated for consolidation purposes.

(3)

During the three months ended September 30, 2022, the noncontrolling member of Merrick notified the Company that it intends to exercise its option to put its ownership interest in the venture to the Company for $17.1 million (the “Put Option”). The Company, at its sole discretion, may pay cash and/or issue OP Units in exchange for the noncontrolling member’s interest. This transaction is expected to be completed subsequent to September 30, 2022. The Company accreted the liability related to the Put Option during the development period and, as of September 30, 2022, has accrued the full $17.1 million. This amount is included in Accounts payable, accrued expenses and other liabilities on the Company’s consolidated balance sheets and in total liabilities within the table above.

(4)

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. In June 2022, the members completed construction of a new store on the Vienna Land. Upon completion, the new store was combined with the Vienna Operating Property and is now operated by the venture as a single store. As of September 30, 2022, the Company has an outstanding loan of $34.9 million to Vienna. The loan is included in total liabilities within the table above. This loan and the related interest were eliminated for consolidation purposes.

(5)

The Company has a related party loan commitment to VFV that was used to fund a portion of the construction costs. As of September 30, 2022, the Company has an outstanding loan of $14.6 million to VFV, which is included in total liabilities 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 September 30, 2022, the Company has funded $5.5 million of a $6.1 million related party loan commitment to Anoka, which is

included in total liabilities 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 September 30, 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 September 30, 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 September 30, 2022 and December 31, 2021.