Investments in Unconsolidated Real Estate Entities

12 Months Ended

Dec. 31, 2024

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 and Strategic Storage, an affiliate of SmartStop, and the Company's noncontrolling interest in real estate joint ventures. The Company accounts for its investments in SmartStop and Strategic Storage preferred stock, which do 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,
				2024		2023
PRISA Self Storage LLC	85	4%	4%	$	8,967	$	9,435
HF1 Sovran HHF Storage Holdings LLC (2)	37	49%	49%-59%	304,526		105,339
Storage Portfolio II JV LLC	36	10%	30%	(9,584)		(8,314)
Storage Portfolio IV JV LLC	32	10%	30%	47,150		48,184
Storage Portfolio I LLC	24	34%	49%	(43,803)		(42,487)
PR II EXR JV LLC	23	25%	25%	105,909		108,160
HF2 Sovran HHF Storage Holdings II LLC (2)	22	49%	49%-59%	114,034		41,613
HF5 Life Storage-HIERS Storage LLC	17	20%	20%	25,192		26,051
HF6 191 V Life Storage Holdings LLC	17	20%	20%	10,821		12,702
ESS-CA TIVS JV LP	16	55%	55%-65%	27,217		29,128
VRS Self Storage, LLC	16	45%	54%	(17,557)		(16,386)
HF10 Life Storage HHF Wasatch Holdings LLC	16	20%	20%	19,295		20,019
Other unconsolidated real estate ventures (3) (4)	119	10%-50%	10%-50%	314,852		317,104
SmartStop Self Storage REIT, Inc. Preferred Stock (6)	n/a	n/a	n/a	200,000		200,000
Strategic Storage Trust VI, Inc. Preferred Stock (5)	n/a	n/a	n/a	150,000		150,000
Net Investments in and Cash distributions in unconsolidated real estate entities	460			$	1,257,019	$	1,000,548
Investments in unconsolidated real estate entities				$	1,332,338	$	1,071,617
Cash distributions in unconsolidated real estate ventures				(75,319)		(71,069)
Net Investments in and Cash distributions in unconsolidated real estate entities				$	1,257,019	$	1,000,548

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

(2)In November 2024, the Company acquired additional ownership interest in HF1 Sovran HHF Storage Holdings LLC and HF2 Sovran HHF Storage Holdings II LLC from its partner in the unconsolidated joint ventures for cash consideration of $251,235. The transaction increased the equity ownership percentages from 20% and 15%, respectively, to 49% in each unconsolidated joint venture. The additional investment is presented on the Company's consolidated balance sheets under investments in unconsolidated real estate entities.

(3)In September 2024, the Company sold its membership interest in the Alan Jathoo JV LLC unconsolidated joint venture, which held nine stores, to its partner in such joint venture and recognized a gain of $3,406 on the transaction. This gain and the gain from the ESS Bristol Investments LLC transaction referenced below are presented in equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and sale of a joint venture interest on the Company's consolidated statements of operations for the year ended December 31, 2024.

(4)In August 2024, the ESS Bristol Investments LLC unconsolidated joint venture sold five of its eight stores to another of the Company's unconsolidated joint ventures, and the Company recognized a gain of $10,324 for its pro rata share of the transaction. The Company then acquired its partner's membership interest in the remaining three stores held by ESS Bristol Investments LLC, which is now presented under real estate assets, net on the Company's consolidated balance sheets.

(5)In May 2023, the Company invested $150,000 in shares of convertible preferred stock of Strategic Storage with a dividend rate of 8.35% per annum, subject to increase after five years. The preferred shares are generally not redeemable for three years, except in the case of a change of control or initial listing of Strategic Storage. Dividend income from this investment is included on the equity in earnings and dividend income from unconsolidated real estate entities on the Company's consolidated statements of operations.

(6)In October 2019, the Company invested $200,000 in shares of convertible preferred stock of SmartStop with a dividend rate of 6.25% per annum. On November 1, 2024, the dividend rate increased to 7.00% per annum, and is now subject to increase each year. 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 statements of operations.

Subsequent to year end, on February 4, 2025, the Company invested $100,000 in shares of newly issued convertible preferred stock of Strategic Storage Growth Trust III, Inc., an affiliate of SmartStop Self Storage REIT, Inc. The dividend rate for the preferred shares is 8.85% 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, and are redeemable thereafter subject to a redemption premium.

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, 2024, there were no previously unconsolidated entities that were required to be consolidated as a result of this review. The Company accounts for its investments in unconsolidated joint 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,
	2024		2023		2022
Equity in earnings of PRISA Self Storage LLC	$	3,212	$	3,320	$	3,272
Equity in earnings of HF1 Sovran HHF Storage Holdings LLC (1)	4,977		1,553		—
Equity in earnings of Storage Portfolio II JV LLC	2,661		3,094		3,398
Equity in earnings of Storage Portfolio IV JV LLC	1,440		1,319		917
Equity in earnings of Storage Portfolio I LLC	4,822		5,182		4,684
Equity in earnings of PR II EXR JV LLC	2,351		2,227		1,229
Equity in earnings of HF2 Sovran HHF Storage Holdings II LLC (1)	2,466		691		—
Equity in earnings of HF5 Life Storage-HIERS Storage LLC (1)	761		377		—
Equity in earnings of HF6 191 V Life Storage Holdings LLC (1)	(891)		(735)		—
Equity in earnings of ESS-CA TIVS JV LP	3,574		3,873		2,753
Equity in earnings of VRS Self Storage, LLC	5,186		5,253		5,401
Equity in earnings of HF10 Life Storage HHF Wasatch Holdings LLC (1)	598		40		—
Equity in earnings of other minority owned stores (1)	10,847		7,740		7,265
Dividend income from SmartStop preferred stock	12,755		12,500		12,509
Dividend income from Strategic Storage preferred stock	12,513		8,401		—
	$	67,272	$	54,835	$	41,428

(1)For the year ended December 31, 2023, the earnings of the 16 joint ventures from the Life Storage Merger are from the close of acquisition on July 20, 2023.

Equity in earnings of certain of our joint ventures includes the amortization of the Company’s excess purchase price of $60,253 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, 2024, 2023 and 2022 were $38,940, $31,755 and $24,389, respectively.