Quarterly report pursuant to Section 13 or 15(d)


6 Months Ended
Jun. 30, 2018
Subsequent Events [Abstract]  
2018 Joint Venture
On July 6, 2018, a wholly owned subsidiary of the Company (the "NSA Member") entered into a limited liability company agreement (the "JV Agreement") of NSA HHF JV, LLC (the "2018 Joint Venture") with an affiliate of Heitman America Real Estate REIT LLC (the "JV Investor" and, together with the NSA Member, the "Members"). The JV Agreement contemplates that the 2018 Joint Venture will acquire from Simply Self Storage, which is a portfolio company of a private real estate fund managed by Brookfield Asset Management, two REITs that own a portfolio of self storage properties (the "Portfolio") for an aggregate purchase price of approximately $1.325 billion (the "Acquisition"). The Portfolio consists of 112 self storage properties containing approximately 8.7 million rentable square feet, configured in over 68,000 storage units and located across 17 states and Puerto Rico.
The closing of the Acquisition by the 2018 Joint Venture, which is subject to the satisfaction of a number of closing conditions, is expected during the third quarter of 2018. Following the closing, the Company expects to rebrand the majority of the Portfolio under its iStorage brand, and the Company’s iStorage management platform will operate the properties.
Under the terms of the JV Agreement, the Company has committed approximately $160.8 million to the 2018 Joint Venture in exchange for a 25% ownership interest. The JV Investor has completed the arrangements for all of the co-investment capital necessary to commit approximately $482.3 million to the 2018 Joint Venture in exchange for the remaining 75% ownership interest necessary to complete the Acquisition.
These capital commitments include each Member's pro rata share of $6.0 million in estimated capital expenditures and $19.0 million in estimated transaction expenses. The Company has committed an additional $64.0 million capital contribution to the 2018 Joint Venture to acquire the six self storage properties in the Portfolio located in Puerto Rico and a single self storage property in the Portfolio located in Ohio (the "Distribution Properties"), which will be distributed by the 2018 Joint Venture to the Company immediately following the closing of the Acquisition in redemption of the interest associated with such additional capital contribution. The 105 properties from the Portfolio that will remain in the 2018 Joint Venture post-closing contain approximately 8.1 million rentable square feet configured in approximately 63,000 storage units.
As of August 6, 2018, the NSA Member had contributed $34.1 million to the 2018 Joint Venture to fund a portion of the $53.0 million non-refundable cash deposit that was made by the 2018 Joint Venture in connection with the Acquisition.
The 2018 Joint Venture has signed a non-binding term sheet with two institutional lenders to provide approximately $643.0 million in secured debt financing to the 2018 Joint Venture, which if obtained, would be used by the 2018 Joint Venture to fund the balance of the purchase price for the Acquisition. The term sheet contemplates that the interest-only financing would carry an interest rate of 4.34% per annum and have a maturity of 10 years. The debt financing would be secured by a first mortgage lien on each self storage property held by the 2018 Joint Venture, except for the Distribution Properties. Although the Company expects the 2018 Joint Venture’s debt financing to be agreed as outlined in the term sheet, the term sheet does not represent a binding commitment, and there can be no assurance that the debt financing needed by the 2018 Joint Venture to complete the Acquisition will actually be arranged on the above terms or at all.
A subsidiary of the Company will act as the non-member manager of the 2018 Joint Venture (the "NSA Manager"). The NSA Manager will direct, manage and control the day-to-day operations and affairs of the 2018 Joint Venture. Certain decisions involving the business of the 2018 Joint Venture and its subsidiaries, including, among others, the approval of annual budgets, sales and acquisitions of properties, financings and certain actions relating to bankruptcy matters, require the approval of both the NSA Member and the JV Investor. The Company expects that the 2018 Joint Venture will not be consolidated in the financial statements of the Company, however, the Company does not expect to finalize its consolidation analysis until the closing of the Acquisition.
The 2018 Joint Venture will pay certain customary fees to the NSA Manager and its affiliates for managing and operating the properties, including a monthly property management fee equal to 6% of monthly gross revenues and net sales revenues from the 2018 Joint Venture assets, a monthly platform fee equal to $1,250 per property, an acquisition fee equal to $4.0 million, of which one-fourth is earned each year over the first four years of the 2018 Joint Venture, with an additional fee determined on a sliding scale for future acquisitions, and a development management fee for any development projects undertaken by the 2018 Joint Venture equal to 3% of construction costs (excluding "soft costs"). In addition, the 2018 Joint Venture will reimburse NSA Manager and its affiliates for costs associated with the integration and transfer of the properties in the Portfolio in an amount equal to $2.0 million. An affiliate of the NSA Manager will provide tenant warranty protection or tenant insurance to tenants at the 2018 Joint Venture properties in exchange for 50% of all proceeds from such tenant warranty protection or tenant insurance program at each 2018 Joint Venture property.
Common Share Offering
On July 13, 2018, the Company closed a follow-on offering of 5,900,000 of its common shares at an offering price of $29.86 per share. The Company received aggregate net proceeds from the offering of approximately $175.7 million after deducting estimated expenses associated with the offering. The Company used the net proceeds from the offering to repay all borrowings outstanding under its Revolver, and the Company expects to use the remaining net proceeds from the offering, together with amounts it expects to redraw from its Revolver, to make capital contributions to the 2018 Joint Venture.