Investments in Unconsolidated Real Estate Entities

9 Months Ended

Sep. 30, 2020

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Real Estate Entities

INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIES

Investments in unconsolidated real estate entities and cash distributions in unconsolidated real estate ventures represent the Company's interest in preferred stock of SmartStop Self Storage REIT, Inc. ("SmartStop") and the Company's noncontrolling interest in real estate joint ventures that own stores. The Company accounts for its investment in SmartStop preferred stock, which does not have a readily determinable fair value, at the transaction price less impairment, if any. The Company accounts for its investments in joint ventures using the equity method of accounting. The Company initially records these investments at cost and subsequently adjusts for cash contributions, distributions and net equity in income or loss, which is allocated in accordance with the provisions of the applicable partnership or joint venture agreement.

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 or 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 or profits than its equity interest.

The Company separately reports investments with net equity less than zero in cash distributions in unconsolidated real estate ventures in the condensed consolidated balance sheets. The net equity of certain joint ventures is less than zero because distributions have exceeded the Company's investment in and share of income from these joint ventures. This is generally the result of financing distributions, capital events or operating distributions that are usually greater than net income, as net income includes non-cash charges for depreciation and amortization while distributions do not.

During the nine months ended September 30, 2020, the Company contributed a total of $13,937 to its joint ventures including the purchase of one operating store, five stores acquired at the issuance of certificate of occupancy, and other capital contributions related to cash flow requirements for lease up stores.

Net investments in unconsolidated real estate ventures and cash distributions in unconsolidated real estate ventures consist of the following:

	Number of Stores	Equity Ownership %	Excess Profit % (1)	September 30,		December 31,
				2020		2019
PR EXR Self Storage, LLC	5	25%	40%	$	60,343	$	59,391
WICNN JV LLC	10	10%	35%	36,161		36,552
VRS Self Storage, LLC	16	45%	54%	17,303		17,639
ESS-NYFL JV LP	11	16%	26%	12,341		13,320
GFN JV, LLC	7	10%	30%	18,473		12,168
PRISA Self Storage LLC	85	4%	4%	8,908		9,133
Alan Jathoo JV LLC	9	10%	10%	7,824		7,977
Storage Portfolio III JV LLC	5	10%	30%	5,761		3,995
ESS Bristol Investments LLC	8	10%	30%	2,807		3,046
Extra Space Northern Properties Six LLC	10	10%	35%	(2,422)		(2,091)
Storage Portfolio II JV LLC	36	10%	30%	(5,244)		(4,827)
Storage Portfolio I LLC	24	34%	49%	(38,860)		(38,345)
Other minority owned stores	21	10-50%	19-50%	27,864		24,832
SmartStop Self Storage REIT, Inc. Preferred Stock (2)	n/a	n/a	n/a	150,000		150,000
Net Investments in and Cash distributions in unconsolidated real estate entities	247			$	301,259	$	292,790

(1) Includes pro-rata equity ownership share and maximum potential promoted interest.

(2) In October 2019, the Company invested $150,000 in shares of newly issued convertible preferred stock of SmartStop, with an additional commitment to purchase up to $50,000 of the preferred shares over the 12 months after the original purchase. The dividend rate for the preferred shares is 6.25% per annum, subject to increase after five years. The preferred shares are generally not redeemable for five years, except in the case of a change of control or initial listing of SmartStop. Dividend income from this investment is included on the equity in earnings and dividend income from unconsolidated real estate entities line on the Company's condensed consolidated statements of operations. On October 26, 2020, the Company invested the additional $50,000 in SmartStop convertible preferred stock that was previously committed.