Annual report pursuant to Section 13 and 15(d)

SELF STORAGE PROPERTY ACQUISITIONS AND DISPOSITIONS

v3.6.0.2
SELF STORAGE PROPERTY ACQUISITIONS AND DISPOSITIONS
 12 Months Ended
Dec. 31, 2016
Business Combinations [Abstract]  
SELF STORAGE PROPERTY ACQUISITIONS AND DISPOSITIONS
SELF STORAGE PROPERTY ACQUISITIONS AND DISPOSITIONS
The Company acquired 107 self storage properties with an estimated fair value of $721.4 million during the year ended December 31, 2016 and 58 self storage properties with an estimated fair value of $313.0 million during the year ended December 31, 2015. During the year ended December 31, 2016, 23 self storage properties with an estimated fair value of $176.3 million were acquired by the Company from the its PROs. During the year ended December 31, 2015, 25 self storage properties with an estimated fair value of $134.4 million were acquired by the Company from its PROs, and 13 self storage properties with an estimated fair value of $65.3 million were acquired by us from an entity which is managed by a member of the Company's board of trustees.
The Company allocated the total purchase price to the estimated fair value of tangible and intangible assets acquired, and liabilities assumed for these self storage property acquisitions. The Company allocated a portion of the purchase price to identifiable intangible assets consisting of customer in-place leases which were recorded at estimated fair value of $17.7 million and $8.5 million during the years ended December 31, 2016 and 2015, respectively, resulting in a total fair value of $703.7 million and $304.5 million allocated to real estate during the years ended December 31, 2016 and 2015, respectively.
The following table summarizes, by calendar quarter, the consideration for the self storage properties acquired by the Company during the years ended December 31, 2016 and 2015 (dollars in thousands):
Acquisitions Closed During the Three Months Ended:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summary of Consideration
 
 
 
 
 
Number of Properties
 
 
 
Value of OP Equity(1)
 
Settlement of Note Receivable
 
Liabilities Assumed (Assets Acquired)
 
Noncontrolling Interests(3)
 
Total Fair Value
 
Cash
 
 
 
Mortgages(2)
 
Other
 
 
3/31/2016
 
17
 
$
63,300

 
$
19,068

 
$
—

 
$
5,861

 
$
584

 
$
—

 
$
88,813

6/30/2016
 
25
 
61,263

 
80,986

 
—

 
55,767

 
1,212

 
—

 
199,228

9/30/2016
 
34
 
199,890

 
4,841

 
—

 
—

 
896

 
—

 
205,627

12/31/2016
 
31
 
208,707

 
16,871

 
—

 
—

 
2,125

 
—

 
227,703

Total
 
107
 
$
533,160

 
$
121,766

 
$
—

 
$
61,628

 
$
4,817

 
$
—

 
$
721,371

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3/31/2015
 
6
 
$
6,991

 
$
8,954

 
$
1,778

 
$
16,442

 
$
70

 
$
6,770

 
$
41,005

6/30/2015
 
21
 
41,277

 
22,971

 
—

 
30,547

 
288

 
—

 
95,083

9/30/2015
 
15
 
84,673

 
10,188

 
—

 
2,866

 
512

 
8,327

 
106,566

12/31/2015
 
16
 
39,626

 
1,402

 
—

 
23,643

 
(359
)
 
6,040

 
70,352

Total
 
58
 
$
172,567

 
$
43,515

 
$
1,778

 
$
73,498

 
$
511

 
$
21,137

 
$
313,006

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) 
Value of OP equity represents the fair value of OP units, subordinated performance units, and LTIP units. 
(2) 
Includes fair value of debt adjustment for assumed mortgages of approximately $7.2 million and $2.2 million during the years ended December 31, 2016 and 2015, respectively.  
(3) 
Represents the fair value of noncontrolling interests associated with self storage properties acquired in DownREIT partnerships. The Company estimates the portion of the fair value of the net assets owned by noncontrolling interests based on the fair value of the real estate and debt assumed. 
The results of operations for these self storage acquisitions are included in the Company's statements of operations beginning on the respective closing date for each acquisition. The accompanying statements of operations includes aggregate revenue of $35.6 million and operating income of $3.7 million related to the 107 self storage properties acquired during the year ended December 31, 2016. For the year ended December 31, 2015, the accompanying statements of operations includes aggregate revenue of $19.3 million and operating income of $2.4 million related to the 58 self storage properties acquired during such period. Acquisition costs in the accompanying statements of operations include consulting fees, transaction expenses, and other costs related to business combinations, which amounted to $6.5 million and $4.8 million for the years ended December 31, 2016 and 2015, respectively.
Unaudited Pro Forma Financial Information
The unaudited pro forma financial information set forth below reflects adjustments to the historical data of the Company to give effect to the acquisitions and related financing activities for (i) 100 of the 107 self storage properties acquired during the year ended December 31, 2016, as if the acquisitions had occurred on January 1, 2015 (unaudited pro forma financial information is not presented for seven of the self storage properties acquired during the year ended December 31, 2016 since the information required is not available to the Company), (ii) 42 of the 58 self storage properties that were acquired during the year ended December 31, 2015, as if each acquisition had occurred on January 1, 2014 (unaudited pro forma financial information is not presented for 16 of the self storage properties acquired during the year ended December 31, 2015 since the information required is not available to the Company), and (iii) each of the 83 self storage property acquisitions that occurred during the year ended December 31, 2014, as if each had occurred on January 1, 2013.
As described in greater detail above, given that certain information with respect to the self storage properties the Company acquired during the years ended December 31, 2016 and 2015 is not available to the Company, readers of these consolidated financial statements and investors are cautioned not to place undue reliance on the Company's unaudited pro forma financial information. The unaudited pro forma information presented below does not purport to represent what the actual results of operations would have been for the periods indicated, nor does it purport to represent the Company's future results of operations. The following table summarizes on an unaudited pro forma basis the results of operations for the years ended December 31, 2016, 2015, and 2014 (dollars in thousands):
 
Unaudited
 
2016
 
2015
 
2014
Pro forma revenue:
 
 
 
 
 
Historical results
$
199,046

 
$
133,919

 
$
76,970

2016 Acquisitions(1)
35,479

 
61,199

 
—

2015 Acquisitions(2)
—

 
9,462

 
22,596

2014 Acquisitions
—

 
—

 
28,377

Total
$
234,525

 
$
204,580

 
$
127,943

Pro forma net income (loss): (3)
 
 
 
 
 
Historical results
$
24,866

 
$
4,796

 
$
(16,357
)
2016 Acquisitions(1)
15,343

 
(23,105
)
 
—

2015 Acquisitions(2)
—

 
10,403

 
(7,258
)
2014 Acquisitions
—

 
—

 
21,395

Total
$
40,209

 
$
(7,906
)
 
$
(2,220
)
 
 
 
 
 
 
(1) 
Reflects 100 of the 107 self storage properties acquired during this period because the information required with respect to the seven remaining properties acquired during this period is not available to the Company. 
(2) 
Reflects 42 of the 58 self storage properties acquired during this period because the information required with respect to the 16 remaining properties acquired during this period is not available to the Company. 
(3) 
Significant assumptions and adjustments in preparation of the pro forma information include the following: (i) for the cash portion of the purchase price for self storage properties acquired subsequent to December 31, 2016 and during the year ended December 31, 2016, the Company assumed borrowings under the Company's revolving line of credit with interest computed based on the effective interest rate of 2.17% as of December 31, 2016; (ii) for the cash portion of the purchase price for properties acquired during the year ended December 31, 2015, the Company assumed borrowings under the Company's revolving line of credit with interest computed based on the effective interest rate of 2.03% as of December 31, 2015; (iii) for the cash portion of the purchase price for properties acquired during the year ended December 31, 2014, the Company assumed borrowings under the Company's revolving line of credit with interest computed based on the effective interest rate of 2.66% as of December 31, 2014; (iv) for assumed debt financing directly associated with the acquisition of specific self storage properties, interest was computed for the entirety of the periods presented using the effective interest rates under such financings; (v) for acquisition costs of $6.5 million incurred during the year ended December 31, 2016, pro forma adjustments give effect to these costs as if they were incurred on January 1, 2015; and (vi) for acquisition costs of $4.8 million incurred during the year ended December 31, 2015, pro forma adjustments give effect to these costs as if they were incurred on January 1, 2014. For acquisition costs of $9.6 million incurred during the year ended December 31, 2014, pro forma adjustments give effect to these expenses as if they were incurred on January 1, 2013. 
Dispositions
In December 2016, the Company sold to an unrelated third party one of the self storage properties acquired as part of a larger portfolio of self storage properties acquired during the year ended December 31, 2016. The gross sales price was $4.9 million and the Company did not recognize any gain or loss on the sale.