4. INVESTMENT IN STORAGE FACILITIES AND INTANGIBLE ASSETS

The following summarizes our activity in storage facilities during the six months ended June 30, 2017:


(dollars in thousands)
Cost:
Beginning balance	$	4,243,308
Acquisition of storage facilities		10,089
Improvements and equipment additions		35,284
Additions to consolidated subsidiary		82
Net increase in construction in progress		10,383
Dispositions		(9,414	)

Ending balance	$	4,289,732

Accumulated Depreciation:
Beginning balance	$	535,704
Additions during the period		51,059
Dispositions		(8,375	)

Ending balance	$	578,388

The Company acquired one self-storage facility during the six months ended June 30, 2017. The acquisition of this facility was accounted for as an asset acquisition (see Note 14 for further discussion of the Company’s adoption of the accounting guidance under ASU 2017-01 as of January 1, 2017). The cost of this facility, including closing costs, was assigned to land, building, equipment and improvements based upon their relative fair values.

The purchase price of the facility acquired in 2017 has been preliminarily assigned as follows:


(dollars in thousands)							Consideration paid
States	Number of Properties		Date of Acquisition		Purchase Price		Cash Paid		Value of Operating Partnership Units Issued		Mortgage Assumed		Net Other Liabilities (Assets) Assumed		Land		Building, Equipment, and Improvements		In-Place Customers Leases		Closing Costs Expensed
IL		1		2/23/17	$	10,089	$	10,076	$	—	$	—	$	13	$	771	$	9,318	$	—	$	—

The facility acquired was purchased from an unrelated third party. The operating results of the facility acquired have been included in the Company’s operations since the acquisition date. The $10.1 million of cash paid for the facility includes $0.5 million of deposits that were paid in 2015 when this facility originally went under contract. This amount is excluded from total cash payments for the acquisition of storage facilities in the consolidated statement of cash flows.

Non-cash investing activities during the six months ended June 30, 2017 include the assumption of net other liabilities of $13,000. Non-cash investing activities during the six months ended June 30, 2016 include the issuance of $7.8 million in Operating Partnership Units, the assumption of two mortgages with fair values totaling $8.3 million, and the assumption of net other liabilities of $1.7 million.

The Company measures the fair value of in-place customer lease intangible assets based on the Company’s experience with customer turnover and the cost to replace the in-place leases. The Company amortizes in-place customer leases on a straight-line basis over 12 months (the estimated future benefit period). The Company measures the value of trade names, which have an indefinite life and are not amortized, by calculating discounted cash flows utilizing the relief from royalty method.

In-place customer leases are included in other assets on the Company’s consolidated balance sheets as follows:


(Dollars in thousands)	Jun. 30, 2017			Dec. 31, 2016
In-place customer leases	$	75,611		$	75,611
Accumulated amortization		(75,478	)		(50,782	)

Net carrying value at the end of period	$	133		$	24,829

Amortization expense related to in-place customer leases was $11.9 million and $1.8 million for the three months ended June 30, 2017 and 2016, respectively, and was $24.7 million and $3.0 million for the six months ended June 30, 2017 and 2016, respectively. The Company expects to record $24.8 million and $0 of amortization expense for the years ended December 31, 2017 and 2018, respectively.

Change in Useful Life Estimates

The change in name of the Company’s storage facilities from Uncle Bob’s Self Storage^®to Life Storage^® required replacement of signage at all existing storage facilities which are currently included in investment in storage facilities, net on the consolidated balance sheets. The replacement of this signage has been substantially completed as of June 30, 2017. As a result of this replacement of signage, the Company reassessed the estimated useful lives of the then existing signage in 2016. This useful life reassessment resulted in an increase in depreciation expense of approximately $0.5 million in the first quarter of 2017 as depreciation was accelerated over the new useful lives. The Company does not estimate any further impact on depreciation expense as a result of the replacement of the Uncle Bob’s Self Storage^® signage which is now fully depreciated.

As part of the Company’s capital improvement efforts during 2017, buildings at certain self-storage facilities were identified for replacement. As a result of the decision to replace these buildings, the Company reassessed the estimated useful lives of the then existing buildings. This useful life reassessment resulted in an increase in depreciation expense of approximately $1.4 million and $1.5 million, respectively, during the three and six month periods ending June 30, 2017. The Company estimates that the change in estimated useful lives of buildings identified for replacement as of June 30, 2017 will result in an additional increase in depreciation expense of approximately $0.5 million during the remainder of 2017.

The accelerated depreciation resulting from the events discussed above reduced both basic and diluted earnings per share/unit by approximately $0.03 and $0.04, respectively, for the three and six month periods ending June 30, 2017.