10.

INVESTMENT IN JOINT VENTURES

The Company has a 20% ownership interest in Sovran HHF Storage Holdings LLC (“Sovran HHF”), a joint venture that was formed in May 2008 to acquire self-storage properties that are managed by the Company. The carrying value of the Company’s investment at March 31, 2014 and December 31, 2013 was $17.3 million and $17.4 million, respectively. Twenty-five properties were acquired by Sovran HHF in 2008 for approximately $171.5 million and no additional properties have been acquired by Sovran HHF since then. In 2008, the Company contributed $18.6 million in cash to the joint venture as its share of capital required to fund the acquisitions. In 2012 the Company contributed an additional $1.2 million in cash to the joint venture. In 2013 the Company received a return of capital distribution of $3.4 million as part of the refinancing of Sovran HHF. As of March 31, 2014, the carrying value of the Company’s investment in Sovran HHF exceeds its share of the underlying equity in net assets of Sovran HHF by approximately $1.7 million as a result of the capitalization of certain acquisition related costs in 2008. This difference is included in the carrying value of the investment, which is assessed for other-than-temporary impairment on a periodic basis. No other-than-temporary impairments have been recorded on this investment.

The Company has a 15% ownership interest in Sovran HHF Storage Holdings II LLC (“Sovran HHF II”), a joint venture that was formed in 2011 to acquire self-storage properties that are managed by the Company. The carrying value of the Company’s investment at March 31, 2014 and December 31, 2013 was $12.9 million and $12.8 million, respectively. Twenty properties were acquired by Sovran HHF II during 2011 for approximately $166.1 million. During 2011, the Company contributed $12.8 million to the joint venture as its share of capital required to fund the acquisitions. Ten additional properties were acquired by Sovran HHF II during 2012 for approximately $29 million. During 2012, the Company contributed $2.4 million to the joint venture as its share of capital required to fund the acquisitions. The carrying value of this investment is assessed for other-than-temporary impairment on a periodic basis and no such impairments have been recorded on this investment.

As manager of Sovran HHF and Sovran HHF II, the Company earns a management and call center fee of 7% of gross revenues which totaled $0.9 million and $0.8 million for the three months ended March 31, 2014 and 2013, respectively. The Company’s share of Sovran HHF and Sovran HHF II’s income for the three months ended March 31, 2014 and 2013 was $0.4 million and $0.4 million, respectively.

The Company also has a 49% ownership interest in Iskalo Office Holdings, LLC, which owns the building that houses the Company’s headquarters and other tenants. The carrying value of the Company’s investment is a liability of $0.5 million at March 31, 2014 and December 31, 2013, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets. The Company’s share of Iskalo Office Holdings, LLC’s income for the three months ended March 31, 2014 and 2013 was $32,000 and $21,000, respectively. The Company paid rent to Iskalo Office Holdings, LLC of $0.3 million and $0.2 million during the three months ended March 31, 2014 and 2013, respectively.

A summary of the unconsolidated joint ventures’ financial statements as of and for the three months ended March 31, 2014 is as follows:


(dollars in thousands)	Sovran HHF Storage Holdings LLC			Sovran HHF Storage Holdings II LLC			Iskalo Office Holdings, LLC
Balance Sheet Data:
Investment in storage facilities, net	$	157,109		$	186,985		$	—
Investment in office building		—			—			4,899
Other assets		5,580			4,803			669

Total Assets	$	162,689		$	191,788		$	5,568

Due to the Company	$	504		$	362		$	—
Mortgages payable		81,680			103,424			6,391
Other liabilities		2,515			2,200			609

Total Liabilities		84,699			105,986			7,000
Unaffiliated partners’ equity (deficiency)		62,392			72,937			(954	)
Company equity (deficiency)		15,598			12,865			(478	)

Total Partners’ Equity (Deficiency)		77,990			85,802			(1,432	)

Total Liabilities and Partners’ Equity (Deficiency)	$	162,689		$	191,788		$	5,568

Income Statement Data:
Total revenues	$	5,452		$	6,887		$	364
Property operating expenses		(1,793	)		(2,596	)		(141	)
Administrative, management and call center fees		(415	)		(512	)		—
Depreciation and amortization of customer list		(962	)		(1,036	)		(57	)
Amortization of financing fees		(46	)		(51	)		(3	)
Income tax expense		(22	)		(100	)		—
Interest expense		(1,073	)		(1,272	)		(97	)

Net income	$	1,141		$	1,320		$	66

The Company does not guarantee the debt of Sovran HHF, Sovran HHF II, or Iskalo Office Holdings, LLC.

We do not expect to have material future cash outlays relating to these joint ventures outside our share of capital for future acquisitions of properties.