Investment in Joint Ventures

3 Months Ended

Mar. 31, 2021

Equity Method Investments And Joint Ventures [Abstract]

Investment in Joint Ventures

10. INVESTMENT IN JOINT VENTURES

A summary of the Company’s unconsolidated joint ventures is as follows:

Venture

Number of

Properties at

March 31,

2021

Company

common

ownership

interest at

March 31,

2021

Carrying value

of investment

at March 31,

2021

Carrying value of

investment at

December 31,

2020

Sovran HHF Storage Holdings LLC (“Sovran HHF”)¹

20%

$60.0 million

$60.5 million

Sovran HHF Storage Holdings II LLC (“Sovran HHF II”)²

15%

$27.0 million

$27.3 million

Life Storage-SERS Storage LLC (“SERS”)

20%

$3.0 million

Life Storage-HIERS Storage LLC (“HIERS”)

20%

$14.2 million

$14.3 million

Iskalo Office Holdings, LLC (“Iskalo”)³

N/A

49%

($2.5 million)

Life Storage Spacemax, LLC ("Spacemax")

40%

$16.5 million

$16.7 million

Life Storage Virtus, LLC ("Virtus")⁴

20%

$1.4 million

$1.5 million

SNL Orix Merrick, LLC ("Merrick")⁵

—

$2.5 million

Joint ventures with properties in development stage⁶

Various

$11.5 million

$10.4 million

Other unconsolidated joint ventures (6 joint ventures)

Various

$6.8 million

^{In September 2020, the Company acquired 17 self-storage facilities and related assets from Sovran HHF for total consideration of $175.2 million, which is net of the Company’s share of Sovran HHF’s gain resulting from the transaction. In connection with this transaction, non-recourse loans with principal balances totaling $34.0 million were settled. Also in September 2020, Sovran HHF sold four self-storage facilities to an unrelated third-party for total consideration of $42.3 million, resulting in a gain on sale of $2.1 million. As of March 31, 2021, 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.}

^{In September 2020, the Company acquired eight self-storage facilities and related assets from Sovran HHF II for total consideration of $120.2 million, which is net of the Company’s share of Sovran HHF II’s gain resulting from the transaction. In connection with this transaction, $35.8 million of cash had been placed into escrow until non-recourse loans related to these properties were able to be paid which occurred in April 2021 (see Note 17). Also in connection with this transaction, the Company made a $12.7 million contribution to Sovran HHF II.}

³	^{Iskalo owns the building that houses the Company’s headquarters. The Company paid rent to Iskalo of $0.4 million and $0.3 million during the three months ended March 31, 2021 and 2020, respectively.}

⁴

^{In February 2020, the Company executed a joint venture agreement, Life Storage Virtus, LLC, with an unrelated third-party with the purpose of acquiring and operating a self-storage facility. During the first quarter of 2020, Virtus acquired a self-storage facility for a total of $21.7 million. In connection with this acquisition, Virtus entered into $14.0 million of non-recourse mortgage debt. During 2020, the Company contributed $1.7 million to Virtus as the Company’s share of the initial capital investment in the joint venture.}

⁵

^{In March 2021, the Company acquired a self-storage facility and related assets from Merrick for total consideration of $47.9 million which is net of the Company’s share of Merrick’s gain resulting from the transaction. In connection with this transaction, all non-recourse loans held by Merrick were settled.}

⁶

^{The Company has entered into seven separate joint ventures, two of which are developing self-storage facilities in Ontario, Canada, four of which are developing self-storage facilities in the New York City market, and one of which is developing a self-storage facility in the Tucson, AZ market. The Company has contributed an aggregate total of $11.5 million as its share of capital to these joint ventures.}

Based on the facts and circumstances of each of the Company’s joint ventures, the Company has determined that none of the joint ventures at March 31, 2021 are a variable interest entity (“VIE”) in accordance with ASC 810, “Consolidation.” The Company used the voting model under ASC 810 to determine whether or not to consolidate the joint ventures. Based upon each member’s substantive participation rights over the activities as stipulated in the joint venture agreements, none of the joint ventures evaluated under the voting model are consolidated by the Company. Due to the Company’s significant influence over the operations of each of the joint ventures, all above joint ventures are accounted for under the equity method of accounting.

The carrying values of the Company’s investments in joint ventures are assessed for other-than-temporary impairment on a periodic basis and no such impairments have been recorded on any of the Company’s investments in joint ventures.

As property manager of the self-storage facilities owned by each of the operational joint ventures, the Company earns management and/or call center fees based on a percentage of joint venture gross revenues. These fees earned from joint ventures, which are included in other operating income in the consolidated statements of operations, totaled $1.8 million and $2.7 million for the three months ended March 31, 2021 and 2020, respectively.

The Company’s share of the unconsolidated joint ventures’ income (loss) is as follows:

(dollars in thousands) Venture	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Sovran HHF	$	654	$	922
Sovran HHF II		332		455
Other unconsolidated joint ventures		235		(261	)
	$	1,221	$	1,116

A summary of the combined unconsolidated joint ventures’ financial statements as of and for the three months ended March 31, 2021 is as follows:

(dollars in thousands)
Balance Sheet Data:
Investment in storage facilities, net	$	1,076,066
Investment in office building, net		4,185
Other assets		58,947
Total Assets	$	1,139,198
Due to the Company	$	520
Mortgages payable		529,504
Other liabilities		17,660
Total Liabilities		547,684
Unaffiliated partners’ equity		453,561
Company equity		137,953
Total Partners’ Equity		591,514
Total Liabilities and Partners’ Equity	$	1,139,198
Income Statement Data:
Total revenues	$	27,231
Property operating expenses		(9,529	)
Administrative, management and call center fees		(2,051	)
Gain on disposal of self-storage facilities		29,685
Depreciation and amortization of customer list		(6,017	)
Amortization of financing fees		(145	)
Income tax expense		(58	)
Interest expense		(5,229	)
Net income	$	33,887

The Company does not guarantee the debt of any of its equity method investees.

We do not expect to have material future cash outlays relating to these joint ventures outside our share of capital required for future acquisitions of properties, our share of capital required for the development of properties under construction, and our share of the payoff of secured debt held by these joint ventures.