INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURE

9 Months Ended

Sep. 30, 2013

INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURE

INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURE

5.  INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURE

On September 26, 2011, the Company contributed $15.4 million in cash for a 50% interest in a partnership that owns nine storage facilities in Pennsylvania, Virginia, New York, New Jersey and Florida, collectively the HSRE Venture (“HSREV”). The other partner held the remaining 50% interest in the partnership.  HSREV was not consolidated because the Company was not the primary beneficiary, the limited partners had the ability to dissolve or remove the Company without cause and the Company did not possess substantive participating rights.  The Company accounted for its unconsolidated interest in its real estate venture using the equity method.  The Company’s investment in HSREV was included in Investment in real estate ventures, at equity on the Company’s consolidated balance sheet and earnings attributable to HSREV were presented in Equity in loss of real estate venture on the Company’s consolidated statements of operations.

As explained in note 4, on September 28, 2012, the Company purchased the remaining 50% ownership in HSREV, for cash of $21.7 million. In addition, upon taking control of these assets, the Company repaid $59.3 million of mortgage loans related to the facilities.  As noted above, the Company previously accounted for its investment in HSREV using the equity method. As a result of this transaction, the Company obtained control of HSREV.  The Company’s original 50% interest was remeasured and as a result, during the three and nine months ended September 30, 2012, the Company recorded a gain of approximately $7.0 million, which is reflected in Gain from remeasurement of investment in real estate venture on the accompanying statements of operations.

The Company’s equity in the loss of the real estate venture for the three and nine months ended September 30, 2012 was approximately $0.3 million and $0.7 million, respectively.

The following is a summary of results of operations of the real estate venture for the three and nine months ended September 30, 2012 (in thousands).

	Three months ended		Nine months ended
	September 30, 2012
Revenue	$	2,426	$	7,229
Operating expenses	1,057		3,010
Interest expense, net	880		2,690
Depreciation and amortization	897		2,691
Net loss	(408)		(1,162)
Company’s share of loss	(284)		(745)

The results of operations above include the periods from July 1, 2012 through September 28, 2012 and January 1, 2012 through September 28, 2012, the date of the Company’s acquisition of the remaining 50% ownership interest.