Leases

12 Months Ended

Dec. 31, 2021

Leases [Abstract]

Leases

LEASES

The Company adopted ASC 842, "Leases," effective January 1, 2019 on a modified retrospective basis as allowed under the standard and thus prior periods have not been restated. The Company elected the package of transition practical expedients, and has therefore (1) not reassessed whether any expired or existing contracts are or contain leases, (2) not reassessed the lease classification for any expired or existing leases, and (3) not reassessed initial direct costs for any expired or existing leases.

Lessee Accounting

The Company recognized right-of-use assets related to operating leases totaling $95,506 and lease liabilities of $104,863 as of the adoption date, January 1, 2019. These are presented as “Operating lease liabilities” and “Real estate assets-operating lease right-of-use assets” on the Company’s consolidated balance sheets. Right-of-use assets associated with finance leases are included in real estate assets, net and finance lease liabilities are included in other liabilities on the Company's consolidated balance sheets.

During the year ended December 31, 2021, the Company recorded new finance lease right-of-use assets and finance lease liabilities totaling $26,998 associated with the acquisition of two stores with land leases. The Company also recorded a finance lease right-of-use asset and a finance lease liability of $40,916 related to a corporate office lease.

In June and August 2019, the Company entered into new triple-net lease agreements to lease land and buildings at 22 and five operating stores, respectively. These leases are categorized as operating leases, and have contractual lease terms of 25 years, but have termination options after 10 years that result in lease terms of 10 years under ASC 842. The Company recorded

new operating lease right-of-use assets and operating lease liabilities of $127,532 and $52,224, respectively, in conjunction with these new lease agreements.

The Company is lessee under several types of lease agreements. Generally, these leases fall into the following categories:

•Leases of real estate at 58 stores classified as wholly-owned or in consolidated joint ventures. These leases generally have original lease terms between 10-99 years. Under these leases, the Company typically has the option to extend the lease term for additional terms of 5-35 years.

•Leases of its corporate offices and call center. These leases have original lease terms between five and 14 years, with no extension options. Subsequent to year-end the Company modified and extended the lease of its corporate offices to add additional space and extend the lease until 2034.

•Leases of 14 regional offices. These leases have original lease terms between three and five years. The Company has the option on certain of these leases to extend the lease term for up to three additional years.

•Leases of small district offices. These leases generally have terms of 12 months or less. The Company has made an election to account for these under the short-term lease exception outlined under ASC 842. Therefore, no lease assets or liabilities are recorded related to these leases.

The Company has included lease extension options in the lease term for calculations of its right-of-use assets and liabilities related to the real estate asset leases at its stores when it is reasonably certain that the Company plans to extend the lease terms as the options arise.

Several of the leases of real estate at the Company’s stores include escalation clauses based on an index or rate, such as the Consumer Price Index (CPI). The Company included these lease payments in its calculations of right-of-use assets and liabilities based on the prevailing index or rate as of the adoption date. The Company will recognize changes to these variable lease payments in earnings in the period of change.

One of the real estate leases includes variable lease payments that are based upon a percentage of gross revenues. Certain other leases include additional variable payments relating to a percentage of sales in excess of a specified amount, common area maintenance, property taxes, and similar items. These payments are variable lease payments that do not depend on an index or rate and are excluded from the measurement of the lease liabilities and right-of-use-assets for these leases. The Company will recognize costs from these variable lease payments in the period in which the obligation for those payments is incurred.

The Company has a signed lease agreement for a store in California. The store is under construction by the lessor, and the Company will take possession of the leased asset upon completion of construction, which is estimated to be completed in 2022. The lease term is 15 years from the lease commencement date, with three 10-year extension options and one 5-year extension option. The Company has not recorded right-of-use asset or lease liability related to this lease as of December 31, 2021 as the lease term has not yet commenced. The lease commencement date will occur when the Company takes possession of the leased asset, and the Company will recognize a lease liability and right-of-use asset relating to the lease at that time.

As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available surrounding the Company’s unsecured borrowing rates and implied secured spread at the lease commencement date in determining the present value of lease payments. These discount rates vary depending on the term of the specific leases.

Following is information on our total lease costs as of the period indicated:

	For the Year Ended December 31,
	2021			2020
Finance lease cost:
Amortization of finance lease right-of-use assets	$	3,049		$	400
Interest expense related to finance lease liabilities	2,812			712
Operating lease cost	29,258			28,709
Variable lease cost	8,100			9,056
Short-term lease cost	51			80
Total lease cost	$	43,270		$	38,957
Cash paid for amounts included in the measurement of lease liabilities
Operating cash outflows for finance lease payments	$	2,812		$	712
Operating cash outflows for operating lease payments	23,961			25,037
Total cash flows for lease liability measurement	$	26,773		$	25,749
Right-of-use assets obtained in exchange for new operating lease liabilities	$	6,655		$	8,014
Right-of-use assets obtained in exchange for new finance lease liabilities	$	67,992		$	50,096
Weighted average remaining lease term - finance leases (years)	54.97			78.48
Weighted average remaining lease term - operating leases (years)	21.25			13.99
Weighted average discount rate - finance leases	3.18		%	3.47		%
Weighted average discount rate - operating leases	3.63		%	3.66		%

The following table presents information about the Company’s undiscounted cash flows on an annual basis for operating and finance leases, including a reconciliation of the undiscounted cash flows to the finance lease and operating lease liabilities recognized in the Company’s consolidated balance sheets:

	Operating		Finance		Total
2022	$	27,641	$	4,214	$	31,855
2023	27,719		5,679		33,398
2024	27,973		5,788		33,761
2025	28,148		5,793		33,941
2026	28,451		5,912		34,363
Thereafter	166,931		312,022		478,953
Total	$	306,863	$	339,408	$	646,271
Present value adjustments	(73,507)		(214,871)		(288,378)
Lease liabilities	$	233,356	$	124,537	$	357,893

The Company elected the package of practical expedients upon adoption of ASC 842, which allows for the application of the standard solely to the transition period in 2019 and does not require application to prior fiscal comparative periods represented. Disclosures required under the previous leasing standard are presented for prior years.

Lessor AccountingThe Company's property rental revenue is primarily related to rents received from tenants at its operating stores. The Company's leases with its self-storage tenants are generally on month-to-month terms, include automatic monthly renewals, allow flexibility to increase rental rates over time as market conditions permit, and provide for the collection of contingent fees such as late fees. These leases do not include any terms or conditions that allow the tenants to purchase the leased space. All self-storage leases for which the Company acts as lessor have been classified as operating leases. The real estate assets related to the Company's stores are included in "Real estate assets, net" on the Company's condensed consolidated balance sheets and are presented at historical cost less accumulated depreciation and impairment, if any. Rental income related to these operating leases is included in Property rental revenue on the Company's condensed consolidated statements of operations, and is recognized each month during the month-to-month terms at the rental rate in place during each month.

Leases

LEASES

The Company adopted ASC 842, "Leases," effective January 1, 2019 on a modified retrospective basis as allowed under the standard and thus prior periods have not been restated. The Company elected the package of transition practical expedients, and has therefore (1) not reassessed whether any expired or existing contracts are or contain leases, (2) not reassessed the lease classification for any expired or existing leases, and (3) not reassessed initial direct costs for any expired or existing leases.

Lessee Accounting

The Company recognized right-of-use assets related to operating leases totaling $95,506 and lease liabilities of $104,863 as of the adoption date, January 1, 2019. These are presented as “Operating lease liabilities” and “Real estate assets-operating lease right-of-use assets” on the Company’s consolidated balance sheets. Right-of-use assets associated with finance leases are included in real estate assets, net and finance lease liabilities are included in other liabilities on the Company's consolidated balance sheets.

During the year ended December 31, 2021, the Company recorded new finance lease right-of-use assets and finance lease liabilities totaling $26,998 associated with the acquisition of two stores with land leases. The Company also recorded a finance lease right-of-use asset and a finance lease liability of $40,916 related to a corporate office lease.

In June and August 2019, the Company entered into new triple-net lease agreements to lease land and buildings at 22 and five operating stores, respectively. These leases are categorized as operating leases, and have contractual lease terms of 25 years, but have termination options after 10 years that result in lease terms of 10 years under ASC 842. The Company recorded

new operating lease right-of-use assets and operating lease liabilities of $127,532 and $52,224, respectively, in conjunction with these new lease agreements.

The Company is lessee under several types of lease agreements. Generally, these leases fall into the following categories:

•Leases of real estate at 58 stores classified as wholly-owned or in consolidated joint ventures. These leases generally have original lease terms between 10-99 years. Under these leases, the Company typically has the option to extend the lease term for additional terms of 5-35 years.

•Leases of its corporate offices and call center. These leases have original lease terms between five and 14 years, with no extension options. Subsequent to year-end the Company modified and extended the lease of its corporate offices to add additional space and extend the lease until 2034.

•Leases of 14 regional offices. These leases have original lease terms between three and five years. The Company has the option on certain of these leases to extend the lease term for up to three additional years.

•Leases of small district offices. These leases generally have terms of 12 months or less. The Company has made an election to account for these under the short-term lease exception outlined under ASC 842. Therefore, no lease assets or liabilities are recorded related to these leases.

The Company has included lease extension options in the lease term for calculations of its right-of-use assets and liabilities related to the real estate asset leases at its stores when it is reasonably certain that the Company plans to extend the lease terms as the options arise.

Several of the leases of real estate at the Company’s stores include escalation clauses based on an index or rate, such as the Consumer Price Index (CPI). The Company included these lease payments in its calculations of right-of-use assets and liabilities based on the prevailing index or rate as of the adoption date. The Company will recognize changes to these variable lease payments in earnings in the period of change.

One of the real estate leases includes variable lease payments that are based upon a percentage of gross revenues. Certain other leases include additional variable payments relating to a percentage of sales in excess of a specified amount, common area maintenance, property taxes, and similar items. These payments are variable lease payments that do not depend on an index or rate and are excluded from the measurement of the lease liabilities and right-of-use-assets for these leases. The Company will recognize costs from these variable lease payments in the period in which the obligation for those payments is incurred.

The Company has a signed lease agreement for a store in California. The store is under construction by the lessor, and the Company will take possession of the leased asset upon completion of construction, which is estimated to be completed in 2022. The lease term is 15 years from the lease commencement date, with three 10-year extension options and one 5-year extension option. The Company has not recorded right-of-use asset or lease liability related to this lease as of December 31, 2021 as the lease term has not yet commenced. The lease commencement date will occur when the Company takes possession of the leased asset, and the Company will recognize a lease liability and right-of-use asset relating to the lease at that time.

As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available surrounding the Company’s unsecured borrowing rates and implied secured spread at the lease commencement date in determining the present value of lease payments. These discount rates vary depending on the term of the specific leases.

Following is information on our total lease costs as of the period indicated:

	For the Year Ended December 31,
	2021			2020
Finance lease cost:
Amortization of finance lease right-of-use assets	$	3,049		$	400
Interest expense related to finance lease liabilities	2,812			712
Operating lease cost	29,258			28,709
Variable lease cost	8,100			9,056
Short-term lease cost	51			80
Total lease cost	$	43,270		$	38,957
Cash paid for amounts included in the measurement of lease liabilities
Operating cash outflows for finance lease payments	$	2,812		$	712
Operating cash outflows for operating lease payments	23,961			25,037
Total cash flows for lease liability measurement	$	26,773		$	25,749
Right-of-use assets obtained in exchange for new operating lease liabilities	$	6,655		$	8,014
Right-of-use assets obtained in exchange for new finance lease liabilities	$	67,992		$	50,096
Weighted average remaining lease term - finance leases (years)	54.97			78.48
Weighted average remaining lease term - operating leases (years)	21.25			13.99
Weighted average discount rate - finance leases	3.18		%	3.47		%
Weighted average discount rate - operating leases	3.63		%	3.66		%

The following table presents information about the Company’s undiscounted cash flows on an annual basis for operating and finance leases, including a reconciliation of the undiscounted cash flows to the finance lease and operating lease liabilities recognized in the Company’s consolidated balance sheets:

	Operating		Finance		Total
2022	$	27,641	$	4,214	$	31,855
2023	27,719		5,679		33,398
2024	27,973		5,788		33,761
2025	28,148		5,793		33,941
2026	28,451		5,912		34,363
Thereafter	166,931		312,022		478,953
Total	$	306,863	$	339,408	$	646,271
Present value adjustments	(73,507)		(214,871)		(288,378)
Lease liabilities	$	233,356	$	124,537	$	357,893

The Company elected the package of practical expedients upon adoption of ASC 842, which allows for the application of the standard solely to the transition period in 2019 and does not require application to prior fiscal comparative periods represented. Disclosures required under the previous leasing standard are presented for prior years.

Lessor AccountingThe Company's property rental revenue is primarily related to rents received from tenants at its operating stores. The Company's leases with its self-storage tenants are generally on month-to-month terms, include automatic monthly renewals, allow flexibility to increase rental rates over time as market conditions permit, and provide for the collection of contingent fees such as late fees. These leases do not include any terms or conditions that allow the tenants to purchase the leased space. All self-storage leases for which the Company acts as lessor have been classified as operating leases. The real estate assets related to the Company's stores are included in "Real estate assets, net" on the Company's condensed consolidated balance sheets and are presented at historical cost less accumulated depreciation and impairment, if any. Rental income related to these operating leases is included in Property rental revenue on the Company's condensed consolidated statements of operations, and is recognized each month during the month-to-month terms at the rental rate in place during each month.

Leases

LEASES

The Company adopted ASC 842, "Leases," effective January 1, 2019 on a modified retrospective basis as allowed under the standard and thus prior periods have not been restated. The Company elected the package of transition practical expedients, and has therefore (1) not reassessed whether any expired or existing contracts are or contain leases, (2) not reassessed the lease classification for any expired or existing leases, and (3) not reassessed initial direct costs for any expired or existing leases.

Lessee Accounting

The Company recognized right-of-use assets related to operating leases totaling $95,506 and lease liabilities of $104,863 as of the adoption date, January 1, 2019. These are presented as “Operating lease liabilities” and “Real estate assets-operating lease right-of-use assets” on the Company’s consolidated balance sheets. Right-of-use assets associated with finance leases are included in real estate assets, net and finance lease liabilities are included in other liabilities on the Company's consolidated balance sheets.

During the year ended December 31, 2021, the Company recorded new finance lease right-of-use assets and finance lease liabilities totaling $26,998 associated with the acquisition of two stores with land leases. The Company also recorded a finance lease right-of-use asset and a finance lease liability of $40,916 related to a corporate office lease.

In June and August 2019, the Company entered into new triple-net lease agreements to lease land and buildings at 22 and five operating stores, respectively. These leases are categorized as operating leases, and have contractual lease terms of 25 years, but have termination options after 10 years that result in lease terms of 10 years under ASC 842. The Company recorded

new operating lease right-of-use assets and operating lease liabilities of $127,532 and $52,224, respectively, in conjunction with these new lease agreements.

The Company is lessee under several types of lease agreements. Generally, these leases fall into the following categories:

•Leases of real estate at 58 stores classified as wholly-owned or in consolidated joint ventures. These leases generally have original lease terms between 10-99 years. Under these leases, the Company typically has the option to extend the lease term for additional terms of 5-35 years.

•Leases of its corporate offices and call center. These leases have original lease terms between five and 14 years, with no extension options. Subsequent to year-end the Company modified and extended the lease of its corporate offices to add additional space and extend the lease until 2034.

•Leases of 14 regional offices. These leases have original lease terms between three and five years. The Company has the option on certain of these leases to extend the lease term for up to three additional years.

•Leases of small district offices. These leases generally have terms of 12 months or less. The Company has made an election to account for these under the short-term lease exception outlined under ASC 842. Therefore, no lease assets or liabilities are recorded related to these leases.

The Company has included lease extension options in the lease term for calculations of its right-of-use assets and liabilities related to the real estate asset leases at its stores when it is reasonably certain that the Company plans to extend the lease terms as the options arise.

Several of the leases of real estate at the Company’s stores include escalation clauses based on an index or rate, such as the Consumer Price Index (CPI). The Company included these lease payments in its calculations of right-of-use assets and liabilities based on the prevailing index or rate as of the adoption date. The Company will recognize changes to these variable lease payments in earnings in the period of change.

One of the real estate leases includes variable lease payments that are based upon a percentage of gross revenues. Certain other leases include additional variable payments relating to a percentage of sales in excess of a specified amount, common area maintenance, property taxes, and similar items. These payments are variable lease payments that do not depend on an index or rate and are excluded from the measurement of the lease liabilities and right-of-use-assets for these leases. The Company will recognize costs from these variable lease payments in the period in which the obligation for those payments is incurred.

The Company has a signed lease agreement for a store in California. The store is under construction by the lessor, and the Company will take possession of the leased asset upon completion of construction, which is estimated to be completed in 2022. The lease term is 15 years from the lease commencement date, with three 10-year extension options and one 5-year extension option. The Company has not recorded right-of-use asset or lease liability related to this lease as of December 31, 2021 as the lease term has not yet commenced. The lease commencement date will occur when the Company takes possession of the leased asset, and the Company will recognize a lease liability and right-of-use asset relating to the lease at that time.

As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available surrounding the Company’s unsecured borrowing rates and implied secured spread at the lease commencement date in determining the present value of lease payments. These discount rates vary depending on the term of the specific leases.

Following is information on our total lease costs as of the period indicated:

	For the Year Ended December 31,
	2021			2020
Finance lease cost:
Amortization of finance lease right-of-use assets	$	3,049		$	400
Interest expense related to finance lease liabilities	2,812			712
Operating lease cost	29,258			28,709
Variable lease cost	8,100			9,056
Short-term lease cost	51			80
Total lease cost	$	43,270		$	38,957
Cash paid for amounts included in the measurement of lease liabilities
Operating cash outflows for finance lease payments	$	2,812		$	712
Operating cash outflows for operating lease payments	23,961			25,037
Total cash flows for lease liability measurement	$	26,773		$	25,749
Right-of-use assets obtained in exchange for new operating lease liabilities	$	6,655		$	8,014
Right-of-use assets obtained in exchange for new finance lease liabilities	$	67,992		$	50,096
Weighted average remaining lease term - finance leases (years)	54.97			78.48
Weighted average remaining lease term - operating leases (years)	21.25			13.99
Weighted average discount rate - finance leases	3.18		%	3.47		%
Weighted average discount rate - operating leases	3.63		%	3.66		%

The following table presents information about the Company’s undiscounted cash flows on an annual basis for operating and finance leases, including a reconciliation of the undiscounted cash flows to the finance lease and operating lease liabilities recognized in the Company’s consolidated balance sheets:

	Operating		Finance		Total
2022	$	27,641	$	4,214	$	31,855
2023	27,719		5,679		33,398
2024	27,973		5,788		33,761
2025	28,148		5,793		33,941
2026	28,451		5,912		34,363
Thereafter	166,931		312,022		478,953
Total	$	306,863	$	339,408	$	646,271
Present value adjustments	(73,507)		(214,871)		(288,378)
Lease liabilities	$	233,356	$	124,537	$	357,893

The Company elected the package of practical expedients upon adoption of ASC 842, which allows for the application of the standard solely to the transition period in 2019 and does not require application to prior fiscal comparative periods represented. Disclosures required under the previous leasing standard are presented for prior years.

Lessor AccountingThe Company's property rental revenue is primarily related to rents received from tenants at its operating stores. The Company's leases with its self-storage tenants are generally on month-to-month terms, include automatic monthly renewals, allow flexibility to increase rental rates over time as market conditions permit, and provide for the collection of contingent fees such as late fees. These leases do not include any terms or conditions that allow the tenants to purchase the leased space. All self-storage leases for which the Company acts as lessor have been classified as operating leases. The real estate assets related to the Company's stores are included in "Real estate assets, net" on the Company's condensed consolidated balance sheets and are presented at historical cost less accumulated depreciation and impairment, if any. Rental income related to these operating leases is included in Property rental revenue on the Company's condensed consolidated statements of operations, and is recognized each month during the month-to-month terms at the rental rate in place during each month.