Property Acquisitions and Dispositions

12 Months Ended

Dec. 31, 2023

PROPERTY ACQUISITIONS AND DISPOSITIONS

The Life Storage Merger

On July 20, 2023, the Company closed its merger with Life Storage (the "Life Storage Merger" or "Merger"), which included 757 wholly-owned stores and one consolidated joint venture store. Under the terms of the Life Storage Merger, Life Storage stockholders and holders of units of the Life Storage operating partnership received 0.895 of a share of common stock (or OP Unit, as applicable) of the Company for each issued and outstanding share (or operating partnership unit) of Life Storage they owned for total consideration of $11,602,808, based on the Company's closing share price on July 19, 2023. At closing, the Company retired $1,160,000 in balances on Life Storage's line of credit which included $375,000 that Life Storage used to pay off its private placement notes in connection with the closing of the Life Storage Merger. The Company also paid off $32,000 in secured loans. On July 25, 2023, the Company completed obligor exchange offers and consent solicitations (together the "Exchange Offers") related to Life Storage's various senior notes. Upon the closing of the Exchange Offers, a total of $2,351,100 of Life Storage's senior notes were exchanged for senior notes of the same tenor of Extra Space Storage L.P. The remaining Life Storage senior note balances which were not exchanged total $48,900 and no longer have any financial reporting requirements or covenants.

Consideration and Purchase Price Allocation

The Merger was accounted for as an asset acquisition in accordance with ASC Topic 805 which requires that the cost of an acquisition be allocated on a relative fair value basis to the assets acquired and the liabilities assumed. The following table summarizes the fair value of total consideration transferred in the Life Storage Merger:


Consideration Type	July 20, 2023
Common stock	$	11,353,338
OP units	249,470
Cash for payoff of Life Storage credit facility and debt	1,192,000
Transaction Costs	55,318
Total consideration	$	12,850,127

The following table summarizes the estimated fair values assigned to the assets acquired and liabilities assumed:


	July 20, 2023
Real estate assets	$	14,587,735
Equity investment in joint venture partnerships	325,250
Cash and other assets	107,423
Intangible assets - other	82,000
Trade name	50,000
Unsecured senior notes	(2,106,866)
Accounts payable, accrued expenses and other liabilities	(191,077)
Noncontrolling interests	(4,338)
Fair value of net assets acquired	$	12,850,127

Fair Value Measurement

The estimated fair values of assets acquired and liabilities assumed were primarily based on information that was available as of the closing date of the Life Storage Merger. The methodology used to estimate the fair values to apply purchase accounting and the ongoing financial statement impact, if any, are summarized below:

•Real estate assets – Real estate assets acquired were recorded at fair value using standard valuation methodologies, including the cost and market approaches. The remaining useful lives for real estate assets, excluding land, were reset to 39 years. Tenant relationships for storage leases were recorded at fair value based on estimated costs the Company

avoided to replace them. Tenant relationships are amortized to expense over 18 months, which is based on the Company’s historical experience with turnover in its stores.

•Equity investment in joint venture partnerships - Equity investment in joint venture partnerships were recorded at fair value based on a direct capitalization of net operating income.

•Intangible assets - other – Customer relationships relating to tenant reinsurance contracts were recorded at fair value based on the income approach which estimates the potential revenue loss the Company avoided to replace them. These assets are amortized to expense over 36 months, which is based on the Company’s historical experience with average length of stay for tenants.

•Trade name – Trade names were recorded at fair value based on royalty payments avoided had the trade name been owned by a third party. This is determined using market royalty rates and a discounted cash flow analysis under the relief-from-royalty method. This method incorporates various assumptions, including projected revenue growth rates, the terminal growth rate, the royalty rate to be applied, and the discount rate utilized. The trade name is an indefinite lived asset and as such is not amortized.

•Unsecured senior notes – Unsecured senior notes were recorded at fair value using readily available market data. The below-market value of debt is recorded as a debt discount and reported as a reduction of the unsecured senior notes balance on the condensed consolidated balance sheets. The discount is amortized using effective interest method as an increase to interest expense over the remaining terms of the unsecured senior notes.

•Other assets and liabilities – the carrying values of cash, accounts receivable, prepaids and other assets, accounts payable, accrued expenses and other liabilities represented the fair values.


	December 31, 2023				Three Months Ended December 31, 2023		For the Year Ended December 31, 2023
Intangible Assets:	Gross Carrying Amount		Accumulated Amortization		Amortization Expense		Amortization Expense
Trade name	$	50,000	$	—	$	—	$	—
Intangible assets - other	82,000		15,695		9,417		15,695
	132,000		15,695		9,417		15,695


	Estimated Aggregate Amortization Expense
Intangible Assets:	2024		2025		2026
Trade name	$	—	$	—	$	—
Intangible assets - other	23,375		19,833		11,569
	$	23,375	$	19,833	$	11,569

Store Acquisition

The following table shows the Company’s acquisitions of stores for the years ended December 31, 2023 and 2022. The table excludes purchases of raw land and improvements made to existing assets.


		Consideration Paid														Total
Period	Number of Stores	Total		Cash Paid		Loan Assumed		Finance Lease Liability		Investments in Real Estate Ventures		Net Liabilities/ (Assets) Assumed		Value of Equity Issued			Real estate assets
Total 2023	14	$	147,729	$	135,577	$	12,000	$	—	$	—	$	152	$	—		$	147,729




Total 2022	153	$	1,366,348	$	1,193,261	$	—	$	6,823	$	1,085	$	(786)	$	165,965		$	1,366,348

On September 15, 2022, the Company completed the acquisition of multiple entities doing business as Storage Express for a purchase price of $590.0 million. A portion of the consideration paid was in the form of the issuance of 619,294 OP units (a total value of $125.0 million) and the remainder in cash. The portfolio included 106 operating stores and eight parcels of land for future development, all located in Illinois, Indiana, Kentucky and Ohio. This acquisition did not meet the definition of a business under ASU 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business" and was therefore recorded as an asset acquisition.

Other Investments

On June 1, 2022, the Company completed the acquisition of Bargold Storage Systems, LLC ("Bargold") for a purchase price of approximately $179.3 million. Bargold leases space in apartment buildings, primarily in New York City and its boroughs, builds out the space as storage units, and subleases the units to tenants. As of June 1, 2022, Bargold had approximately 17,000 storage units with an approximate occupancy of 97%. This acquisition is considered a business combination under ASU 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business."

The following table summarizes the total consideration transferred to acquire Bargold:




Total cash paid by the company	$	157,302
Fair value of Series D Units issued	16,000
Fair value of OP Units issued	6,000
Total consideration transferred	$	179,302

As part of this acquisition, we recorded an expense of $1,465 related to transaction costs.

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date:


Cash and cash equivalents	$	175
Fixed assets	6,411
Developed technology	500
Trademarks	500
Customer relationships	1,870
Other assets	125
Accounts payables and accrued liabilities assumed	(1,090)
Nets asset acquired	8,491
Goodwill	170,811
Total assets acquired	$	179,302

The following table summarizes the revenues and earnings related to Bargold since the acquisition date of June 1, 2022, which are included in the Company's consolidated statement of operations for the year ended December 31, 2022:


Total revenues	$	9,374
Net income from operations	$	1,718

Pro Forma Information

As noted above, during the year ended December 31, 2022, the Company acquired Bargold. The following pro forma financial information is based on the combined historical financial statements of the Company and Bargold, however, only includes revenue and presents the Company's results as if the acquisition had occurred on January 1, 2021. Net income was excluded as it was impracticable to report expenses due to the lack of historical accrual basis accounting.


	For the Year Ended December 31, 2022		For the Year Ended December 31, 2021
	Pro Forma		Pro Forma
Total revenues	$	1,930,816	$	1,592,021

Store Dispositions

The Company disposed of one store on May 18, 2022 and one on June 21, 2022, for a total cash consideration of approximately $38.7 million, resulting in a gain of approximately $14.2 million. Both had been classified as held for sale.

On December 16, 2021 the Company sold 16 stores that had been classified as held for sale for total cash consideration of $200,292. The Company recorded a gain of $73,854.

On March 1, 2021 the Company sold 16 stores that had been classified as held for sale to a newly established unconsolidated joint venture. The Company received $132,759 and maintained a 55% interest in the new joint venture valued at $33,878. The Company recognized a gain of $63,477 related to the sale of these properties.