INVESTMENTS IN UNCONSOLIDATED REAL ESTATE VENTURES

Investments in unconsolidated real estate ventures consist of the following:



	Equity Ownership %	Excess Profit Participation %	December 31,
	Equity Ownership %	Excess Profit Participation %	2016			2015
VRS Self Storage LLC ("VRS")	45%	54%	$	20,433		$	39,091
PR EXR Self Storage, LLC ("PREXR")	25%	40%	12,430			—
Storage Portfolio I LLC ("SP I")	25%	25-40%	11,782			11,813
PRISA Self Storage LLC ("PRISA")	4%	4%	10,152			10,309
Extra Space West Two LLC ("ESW II")	5%	40%	4,048			4,122
Clarendon Storage Associates Limited Partnership ("Clarendon")	50%	50%	3,111			3,131
Extra Space of Santa Monica LLC ("ESSM")	48%	48%	1,202			1,200
WCOT Self Storage LLC ("WCOT")	5%	20%	160			3,783
PRISA II Self Storage LLC ("PRISA II")	—%	—%	—			8,323
Extra Space West One LLC ("ESW")	5%	40%	(546		)	(405		)
Extra Space Northern Properties Six LLC ("ESNPS")	10%	35%	(905		)	(470		)
Other minority owned properties	10-50%	19-50%	17,703			6,148
			79,570			87,045
Investments in Strategic Storage Growth Trust "SSGT"			—			15,962
Total			$	79,570		$	103,007

In these joint ventures, the Company and the joint venture partner generally receive a preferred return on their invested capital. To the extent that cash/profits in excess of these preferred returns are generated through operations or capital transactions, the Company would receive a higher percentage of the excess cash/profits than its equity interest.

In accordance with ASC 810, the Company reviews all of its joint venture relationships quarterly to ensure that there are no entities that require consolidation. As of December 31, 2016, there were no previously unconsolidated entities that were required to be consolidated as a result of this review.

The Company has entered into several new real estate ventures. The Company accounts for its investment in the following ventures under the equity method of accounting. Information about these real estate ventures is summarized as follows:



Joint venture	Date of initial contribution	Initial Investment		Equity Ownership %	Number of operating stores owned
BH Ridgelake LLC	12/21/2016	$	1,301	20.0%	1
ESS-GS Portland & Broadway LLC	10/19/2016	1,250		25.0%	1
ESS-GS Vancouver-139th LLC	9/14/2016	806		25.0%	1
ESS-H Elmont Associates LLC	8/16/2016	4,712		50.0%	1
ESS-GS Hillsboro-73rd LLC	7/8/2016	376		25.0%	1
BH Storage Columbia LLC	5/20/2016	1,034		20.0%	1
PR EXR Self-Storage, LLC	4/8/2016	12,114		25.0%	1
ESS-H Baychester Investments LLC	3/31/2016	4,794		44.4%	1
ESS-H Bloomfield Investment LLC	12/30/2015	2,885		50.0%	1

On September 16, 2016, subsequent to its acquisition of 23 properties as outlined in Note 4, the Company sold its 4.42% interest in PRISA II to Prudential for $34,758 in cash. The carrying value of the Company's investment prior to the acquisition was $3,912, and the Company recorded a gain on the sale of $30,846. This gain is included in equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partners' interests on the Company's consolidated statements of operations.

On April 25, 2016, the Company and Prudential entered into the “Second Amendment to Amended and Restated Operating Agreement of ESS PRISA LLC” and the “First Amendment to Amended and Restated Operating Agreement of ESS PRISA II LLC” (the “Amendments”). The Amendments are deemed effective as of April 1, 2016. Under the Amendments, the Company gave up any future rights to receive distributions from these joint ventures at the higher “excess profit participation” percentage of 17.0% in exchange for a higher equity ownership percentage. The Company’s equity ownership in ESS PRISA LLC increased from 2.0% to 4.0%, and the Company’s equity ownership in ESS PRISA II LLC increased from 2.0% to 4.4%. The Company continues to account for its investment in PRISA under the equity method of accounting. The Company subsequently sold its interest in PRISA II as noted above.

In December 2013 and May 2014, the Company acquired twelve stores located in California from entities associated with Grupe Properties Co. Inc. (“Grupe.”) As part of the Grupe acquisition, the Company acquired its joint venture partners’ 60% to 65% equity interests in six stores. The Company previously held the remaining 35% to 40% interests in these stores through six separate joint ventures with Grupe. Prior to the acquisition, the Company accounted for its interests in these joint ventures as equity-method investments. The Company recognized a non-cash gain of $3,438 during the year ended December 31, 2014 as a result of re-measuring the fair value of its equity interest in one of these joint ventures held before the acquisition. During the year ended December 31, 2014, the Company recorded a gain of $584 as a result of the final cash distributions received from the other five joint ventures associated with the acquisitions that were completed during 2013.

Equity in earnings of unconsolidated real estate ventures consists of the following:



	For the Year Ended December 31,
	2016			2015		2014
Equity in earnings of VRS	$	2,919		$	4,041	$	3,510
Equity in earnings of PREXR	(172		)	—		—
Equity in earnings of SP I	2,380			1,951		1,541
Equity in earnings of PRISA	1,912			1,013		929
Equity in earnings of ESW II	174			145		102
Equity in earnings of Clarendon	620			581		551
Equity in earnings of ESSM	596			493		424
Equity in earnings of WCOT	614			569		498
Equity in earnings of PRISA II	1,016			793		764
Equity in earnings of ESW	2,269			1,875		1,571
Equity in earnings of ESNPS	823			633		513
Equity in earnings of other minority owned properties	(256		)	257		138
	$	12,895		$	12,351	$	10,541

Equity in earnings of ESW II, SP I and VRS includes the amortization of the Company’s excess purchase price of $26,806 of these equity investments over its original basis. The excess basis is amortized over 40 years.

Information (unaudited) related to the real estate ventures’ debt at December 31, 2016, is presented below:



	Loan Amount		Current Interest Rate		Debt Maturity
VRS - Swapped to fixed	$	52,100	3.19	%	June 2020
PREXR	—		—	%	Unleveraged
SP I - Fixed	86,285		4.66	%	April 2018
PRISA	—		—	%	Unleveraged
ESW II - Swapped to fixed	18,072		3.57	%	February 2019
Clarendon - Swapped to fixed	7,596		5.93	%	September 2018
ESSM - Variable	13,374		2.52	%	May 2021
WCOT - Swapped to fixed	87,500		3.34	%	August 2019
ESW - Variable	17,150		2.02	%	August 2020
ESNPS - Variable	35,500		2.12	%	July 2025
Other minority owned properties	67,087		Various		Various

Combined, condensed unaudited financial information of VRS, PREXR, SP I, PRISA, ESW II, PRISA II, WCOT, ESW and ESNPS as of December 31, 2016 and 2015, and for the years ended December 31, 2016, 2015 and 2014, follows:



	December 31,
	2016		2015
Balance Sheets:
Assets:
Net real estate assets	$	906,637	$	1,389,974
Other	34,116		33,703
	$	940,753	$	1,423,677
Liabilities and members' equity:
Notes payable	$	296,607	$	299,730
Other liabilities	19,878		25,715
Members' equity	624,268		1,098,232
	$	940,753	$	1,423,677



	For the Year Ended December 31,
	2016			2015			2014
Statements of Income:
Rents and other income	$	269,858		$	286,857		$	273,231
Expenses	(143,805		)	(155,851		)	(153,973		)
Gain on sale of real estate	—			60,495			—
Net income	$	126,053		$	191,501		$	119,258

In March 2015, PRISA II sold a single store located in New York and recorded a gain of $60,495.

The Company had no consolidated VIEs for the years ended December 31, 2016 or 2015.