Investments in Unconsolidated Real Estate Entities

3 Months Ended

Mar. 31, 2022

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Real Estate Entities

INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIES

Investments in unconsolidated real estate entities and cash distributions in unconsolidated real estate ventures represent the Company's interest in preferred stock of SmartStop Self Storage REIT, Inc. ("SmartStop") and the Company's noncontrolling interest in real estate joint ventures that own stores. The Company accounts for its investment in SmartStop preferred stock, which does not have a readily determinable fair value, at the transaction price less impairment, if any. The Company accounts for its investments in joint ventures using the equity method of accounting. The Company initially records these investments at cost and subsequently adjusts for cash contributions, distributions and net equity in income or loss, which is allocated in accordance with the provisions of the applicable partnership or joint venture agreement.

In these joint ventures, the Company and the joint venture partner generally receive a preferred return on their invested capital. To the extent that cash or profits in excess of these preferred returns are generated through operations or capital transactions, the Company would receive a higher percentage of the excess cash or profits than its equity interest.

The Company separately reports investments with net equity less than zero in cash distributions in unconsolidated real estate ventures in the condensed consolidated balance sheets. The net equity of certain joint ventures is less than zero because distributions have exceeded the Company's investment in and share of income from these joint ventures. This is generally the result of financing distributions, capital events or operating distributions that are usually greater than net income, as net income includes non-cash charges for depreciation and amortization while distributions do not.

Net investments in unconsolidated real estate ventures and cash distributions in unconsolidated real estate ventures consist of the following:

	Number of Stores	Equity Ownership %	Excess Profit % (1)	March 31,		December 31,
				2022		2021
PRISA Self Storage LLC	85	4%	4%	$	8,746	$	8,792
Storage Portfolio II JV LLC	36	10%	30%	(6,336)		(6,116)
Storage Portfolio IV JV LLC	29	10%	30%	44,156		40,174
Storage Portfolio I LLC	24	34%	49%	(40,447)		(40,168)
PR II EXR JV LLC	18	25%	25%	70,131		70,403
ESS-CA TIVS JV LP	16	55%	60%	32,582		32,288
VRS Self Storage, LLC	16	45%	54%	(14,619)		(14,269)
ESS-NYFL JV LP	11	16%	24%	11,746		11,796
Extra Space Northern Properties Six LLC	10	10%	35%	(3,104)		(3,029)
Alan Jathoo JV LLC	9	10%	10%	7,556		7,621
ESS Bristol Investments LLC	8	10%	30%	2,204		2,628
PR EXR Self Storage, LLC	5	25%	40%	59,172		59,393
Storage Portfolio III JV LLC	5	10%	30%	5,562		5,596
Other minority owned stores	16	20-50%	20-50%	33,436		18,635
SmartStop Self Storage REIT, Inc. Preferred Stock (2)	n/a	n/a	n/a	200,000		200,000
Net Investments in and Cash distributions in unconsolidated real estate entities	288			$	410,785	$	393,744

(1) Includes pro-rata equity ownership share and maximum potential promoted interest.

(2) The Company invested in shares of convertible preferred stock of SmartStop. The dividend rate for the preferred shares is 6.25% per annum, subject to increase after five years. The preferred shares are generally not redeemable for five years, except in the case of a change of control or initial listing of SmartStop. Dividend income from this investment is included on the equity in earnings and dividend income from unconsolidated real estate entities line on the Company's condensed consolidated statements of operations.

During the three months ended March 31, 2022, the Company contributed a total of $4,321 of cash to its joint ventures, including its pro-rata portion of the purchase price of two operating stores.