Investments in Unconsolidated Real Estate Entities

12 Months Ended

Dec. 31, 2022

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Real Estate Entities

INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIESInvestments 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, as applicable, 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 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.

Net Investments in unconsolidated real estate entities and Cash distributions in unconsolidated real estate ventures consist of the following:

	Number of Stores	Equity Ownership %	Excess Profit % (1)	December 31,
				2022		2021
PRISA Self Storage LLC	84	4%	4%	$	8,596	$	8,792
Storage Portfolio II JV LLC	36	10%	30%	(7,200)		(6,116)
Storage Portfolio IV JV LLC	32	10%	30%	49,139		40,174
Storage Portfolio I LLC	24	34%	49%	(41,372)		(40,168)
PR II EXR JV LLC	23	25%	25%	110,172		70,403
ESS-CA TIVS JV LP	16	55%	60%	30,778		32,288
VRS Self Storage, LLC	16	45%	54%	(15,399)		(14,269)
ARA-EXR JV LLC	12	10%	30%	19,137		—
ESS-NYFL JV LP	11	16%	24%	11,332		11,796
Extra Space Northern Properties Six LLC	10	10%	35%	(3,382)		(3,029)
Alan Jathoo JV LLC	9	10%	10%	7,414		7,621
ESS Bristol Investments LLC	8	10%	30%	2,110		2,628
ESS - BGO Atlanta GA JV LLC	7	20%	35%	30,467		—
Storage Portfolio V JV LLC	6	10%	30%	9,517		—
PR EXR Self Storage, LLC	5	25%	40%	58,476		59,393
Storage Portfolio III JV LLC	5	10%	30%	5,467		5,596
Other unconsolidated real estate ventures	14	20-50%	20-50%	39,808		18,635
SmartStop Self Storage REIT, Inc. Preferred Stock (2)	n/a	n/a	n/a	200,000		200,000
Net Investments in and Cash distributions in unconsolidated real estate entities	318			$	515,060	$	393,744

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

(2)The Company invested in shares of convertible preferred stock of SmartStop. 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 consolidated statement of operations.

In June 2021, the Company sold its interest in two unconsolidated joint ventures to its joint venture partner. The Company received proceeds of $1,888 in cash, and recorded a gain of $525 which is included in Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partner's interest in the Company's condensed consolidated statements of operations. The Company also purchased its joint venture partners' interests in two unconsolidated joint ventures.

Also in June 2021, the WICNN JV LLC and GFN JV, LLC joint ventures sold all 17 of the stores owned by the joint ventures to a third party. Subsequent to the sales, these joint ventures were dissolved. As a result of these transactions, the Company recorded a gain of $5,739, which is included in Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partner's interest in the Company's consolidated statements of operations.

In accordance with ASC 810, the Company reviews all of its joint venture relationships annually to ensure that there are no entities that require consolidation. As of December 31, 2022, there were no previously unconsolidated entities that were required to be consolidated as a result of this review.

The Company entered into four new unconsolidated real estate joint ventures of which added a total of 27 stores and a total investment of $66,592 to the Company's portfolio during the year ended December 31, 2022. Additionally, the Company's existing joint ventures added 10 stores for a total investment of $54,724 during the year ended December 31, 2022. The Company accounts for its investment in these ventures under the equity method of accounting.

Equity in earnings and dividend income from unconsolidated real estate entities consists of the following:

	For the Year Ended December 31,
	2022		2021		2020
Dividend income from SmartStop preferred stock	$	12,509	$	12,500	$	9,968
Equity in earnings of PRISA Self Storage LLC	3,272		2,719		2,229
Equity in earnings of Storage Portfolio II JV LLC	3,398		1,802		559
Equity in earnings of Storage Portfolio IV JV LLC	917		112		—
Equity in earnings of Storage Portfolio I LLC	4,684		2,833		1,636
Equity in earnings of PR II EXR JV LLC	1,229		(8)		—
Equity in earnings of ESS-CA TIVS JV LP	2,753		1,274		—
Equity in earnings of VRS Self Storage, LLC	5,401		4,352		3,509
Equity in earnings of ARA-EXR JV LLC	180		—		—
Equity in earnings of ESS-NYFL JV LLC	803		427		(331)
Equity in earnings of Extra Space Northern Properties Six LLC	1,734		1,363		1,088
Equity in earnings of ESS-BGO Atlanta GA JV LLC	55		—		—
Equity in earnings of Alan Jathoo JV LLC	482		270		57
Equity in earnings of Bristol Investments LLC	350		177		(67)
Equity in earnings of Storage Portfolio V JV LLC	(33)		—		—
Equity in earnings of PR EXR Self Storage, LLC	1,030		491		(211)
Equity in earnings of WICNN JV LLC	—		1,050		1,878
Equity in earnings of GFN JV, LLC	—		546		788
Equity in earnings of other minority owned stores	2,664		2,450		1,258
	$	41,428	$	32,358	$	22,361

Equity in earnings of certain of our joint ventures includes the amortization of the Company’s excess purchase price of $24,839 of these equity investments over its original basis. The excess basis is amortized over 39 years.

The Company provides management services to joint ventures for a fee. Management fee revenues for affiliated real estate joint ventures for the years ended December 31, 2022, 2021 and 2020 were $24,389, $17,619 and $15,657, respectively.