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INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES

9 Months Ended

Sep. 30, 2024

INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES

INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES

5. INVESTMENTS 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		2024		2023		2024			2023
Fontana Self Storage, LLC ("Fontana") ⁽¹⁾		50%		1		1		$	13,305		$	13,575
Rancho Cucamonga Self Storage, LLC ("RCSS") ⁽¹⁾		50%		1		1			20,249			20,679
191 V CUBE LLC ("HVP V")		20%		6		6			11,587			12,759
191 IV CUBE LLC ("HVP IV")		20%		28		28			15,083			17,085
CUBE HHF Northeast Venture LLC ("HHFNE")		10%		13		13			820			951
CUBE HHF Limited Partnership ("HHF")		50%		28		28			31,117			33,239
				77		77		$	92,161		$	98,288

(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. These differences are being amortized over the expected useful life of the self-storage properties owned by the ventures. As of September 30, 2024, the remaining unamortized difference was $12.5 million for Fontana and $18.7 million for RCSS.

As of September 30, 2024, the Company also held a 10% interest in 191 IV CUBE Southeast LLC ("HVPSE"). 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. During the nine months ended September 30, 2023, the Company received distributions of $1.7 million in excess of its investment in HVPSE from proceeds that were held back at the time of the sale. These distributions are included in Equity in earnings of real estate ventures within the Company’s consolidated statements of operations. As of September 30, 2024, HVPSE had no significant assets or liabilities.

The Company determined that Fontana, RCSS, HVP V, HVPSE, HVP IV, HHFNE and HHF (collectively, 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 within the Company’s consolidated statements of operations.

The amounts reflected in the following table are based on the historical financial information of the Ventures. The following is a summary of the financial position of the Ventures as of September 30, 2024 and December 31, 2023.


		September 30,			December 31,
		2024			2023

Assets		(in thousands)
Storage properties, net		$	689,642		$	715,142
Other assets			21,050			10,382
Total assets		$	710,692		$	725,524

Liabilities and equity
Debt		$	471,915		$	470,573
Other liabilities			23,996			18,557
Equity
CubeSmart			60,966			66,446
Joint venture partners			153,815			169,948
Total liabilities and equity		$	710,692		$	725,524

The following is a summary of results of operations of the Ventures for the three and nine months ended September 30, 2024 and 2023.


		Three Months Ended September 30,						Nine Months Ended September 30,
		2024			2023			2024			2023

		(in thousands)
Total revenues		$	25,395		$	25,519		$	74,821		$	74,139
Operating expenses			(10,362)			(10,642)			(31,277)			(31,707)
Other expenses			(99)			27			(316)			(221)
Interest expense, net			(7,399)			(4,276)			(18,633)			(12,785)
Depreciation and amortization			(7,283)			(7,611)			(22,223)			(23,058)
Net income		$	252		$	3,017		$	2,372		$	6,368
Company’s share of net income		$	418		$	1,141		$	1,688		$	4,482