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INVESTMENT ACTIVITY

12 Months Ended

Dec. 31, 2023

INVESTMENT ACTIVITY

INVESTMENT ACTIVITY

4. INVESTMENT ACTIVITY

2023 Acquisition

During the year ended December 31, 2023, the Company acquired one store located in New Jersey for a purchase price of $22.0 million. In connection with this transaction, 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 relative fair value. Intangible assets consisted of in-place leases, which aggregated to $2.0 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, 2023 was approximately $0.2 million.

As of December 31, 2023 the Company had made a deposit of $0.2 million associated with a portfolio of two stores that was under contract to be acquired for an acquisition price of $20.2 million (see note 18). This deposit is reflected in Other assets, net on the Company’s consolidated balance sheets.

2023 Dispositions

During the year ended December 31, 2023, the Company sold the California Yacht Club, which it purchased in December 2021 as part of the LAACO acquisition, for $0.8 million. A loss of $0.2 million was recognized in conjunction with the sale. This loss is included in the component of other (expense) income designated as Other within the Company’s consolidated statements of operations.

Additionally, in December 2023, a store was subject to an involuntary conversion by the Department of Transportation of the State of Illinois. The Company received $8.0 million as consideration and recorded a gain of $4.8 million. This gain is included in the component of other (expense) income designated as Other within the Company’s consolidated statements of operations.

2022 Acquisitions

During the year ended December 31, 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 relative 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 years ended December 31, 2023 and 2022 was approximately $1.1 million and $2.3 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 to 191 IV CUBE LLC.

2022 Disposition

During the year ended December 31, 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.

Development Activity

As of December 31, 2023, the Company had invested in consolidated joint ventures to develop four self-storage properties located in New Jersey (1) and New York (3). Construction for these projects is expected to be completed by the third quarter of 2025. As of December 31, 2023, development costs incurred to date for these projects totaled $59.3 million. Total construction costs for these projects

are expected to be $109.7 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, 2021. 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⁾		1		Q3 2022		100%		$	37,200
Vienna, VA ⁽²⁾		1		Q2 2022		80%			21,800
Newton, MA ⁽³⁾		1		Q4 2021		100%			20,800
East Meadow, NY ⁽¹⁾		1		Q2 2021		100%			25,900
King of Prussia, PA		1		Q2 2021		70%			22,800
Arlington, VA ⁽²⁾		1		Q1 2021		90%			26,400
		6						$	154,900

(1)

These stores were previously owned by two separate consolidated joint ventures, of which the Company held a 51% ownership interest in each. 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. On January 18, 2023, the noncontrolling member in the venture that owned the Valley Stream, NY store put its 49% interest in the venture to the Company for $15.3 million. The cash payments related to each of these transactions are included in Development costs in the consolidated statements of cash flows.

(2)

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.

(3)

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 this venture was reported in Noncontrolling interests in subsidiaries on the Company’s 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.

During the year ended December 31, 2023, construction on a portion of the Company’s development property in Astoria, NY was substantially completed and opened for operation. The remainder of the development is expected to be completed during the second quarter of 2024.

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). During the year ended December 31, 2022, the Company sold the Los Angeles Athletic Club (see above). During the year ended December 31, 2023, the Company sold the California Yacht Club (see above).

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, $10.3 million and $14.8 million were included in the component of other (expense) income designated as Other for the years ended December 31, 2022 and 2021, respectively. There were no severance costs recognized during the year ended December 31, 2023.

(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 years ended December 31, 2022 and 2021 was approximately $100.6 million and $9.1 million, respectively. There was no amortization expense recognized for these in-place leases during the year ended December 31, 2023.

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. 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 years ended December 31, 2022 and 2021

was approximately $8.3 million and $3.6 million, respectively. There was no amortization expense recognized for these in-place leases during the year ended December 31, 2023.

2021 Dispositions

During the year ended December 31, 2021, the Company sold five stores 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.