INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES

12 Months Ended

Dec. 31, 2023

INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES

INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES

5. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES

The Company’s investments in unconsolidated real estate ventures are summarized as follows (dollars in thousands):

	CubeSmart	Number of Stores as of		Carrying Value of Investment as of
	Ownership	December 31,		December 31,
Unconsolidated Real Estate Ventures	Interest	2023	2022	2023		2022
Fontana Self Storage, LLC ("Fontana") (1)	50%	1	1	$	13,575	$	13,789
Rancho Cucamonga Self Storage, LLC ("RCSS") (1)	50%	1	1		20,679		20,994
191 V CUBE LLC ("HVP V")	20%	6	6		12,759		14,318
191 IV CUBE LLC ("HVP IV")	20%	28	28		17,085		19,853
CUBE HHF Northeast Venture LLC ("HHFNE")	10%	13	13		951		1,101
CUBE HHF Limited Partnership ("HHF")	50%	28	28		33,239		35,938
		77	77	$	98,288	$	105,993

(1) On December 9, 2021, the Company completed the acquisition of LAACO, which included a 50% interest in Fontana and RCSS, each of which owns one self-storage property in California. As of the date of acquisition, the Company recognized differences between the Company’s equity investment in Fontana and RCSS and the underlying equity reflected at the venture level. As of December 31, 2023, this difference was $12.8 million for Fontana and $19.0 million for RCSS. These differences are being amortized over the expected useful life of the self-storage properties owned by the ventures.

As of December 31, 2023, the Company also held a 10% interest in 191 IV CUBE Southeast LLC ("HVPSE"). On August 30, 2022, HVPSE sold all 14 of its stores to an unaffiliated third-party buyer for an aggregate sales price of $235.0 million. During the year ended December 31, 2023, the Company received distributions of $1.7 million in excess of its investment in HVPSE from proceeds that were held back at the time of the sale. These distributions are included in Equity in earnings of real estate ventures within the Company’s consolidated statements of operations. As of December 31, 2023, HVPSE had no assets or liabilities.

The Company determined that Fontana, RCSS, HVP V, HVPSE, HVP IV, HHFNE and HHF (the “Ventures”) are not VIEs in accordance with the accounting standard for the consolidation of VIEs. As a result, the Company used the voting interest model under the accounting standard for consolidation in order to determine whether to consolidate the Ventures. Based upon each member's substantive participating rights over the activities of each entity as stipulated in the operating agreements, the Ventures are not consolidated by the Company and are accounted for under the equity method of accounting. The Company’s investments in the Ventures are included in Investment in real estate ventures, at equity on the Company’s consolidated balance sheets and the Company’s earnings from its investments in the Ventures are presented in Equity in earnings of real estate ventures within the Company’s consolidated statements of operations.

The amounts reflected in the following table are based on the historical financial information of the Ventures. The following is a summary of the financial position of the Ventures as of December 31, 2023 and 2022:

	December 31,
	2023		2022
Assets	(in thousands)
Storage properties, net	$	715,142	$	741,563
Other assets		10,382		11,708
Total assets	$	725,524	$	753,271
Liabilities and equity
Debt	$	470,573	$	468,783
Other liabilities		18,557		16,626
Equity
CubeSmart		66,446		73,289
Joint venture partners		169,948		194,573
Total liabilities and equity	$	725,524	$	753,271

The following is a summary of results of operations of the Ventures for the years ended December 31, 2023, 2022, and 2021:

	For the year ended December 31,
	2023		2022		2021
	(in thousands)
Total revenues	$	99,442	$	102,910	$	88,449
Operating expenses		(40,677)		(42,408)		(37,967)
Other expenses		(347)		(484)		(1,138)
Interest expense, net		(17,189)		(15,568)		(12,031)
Depreciation and amortization		(30,607)		(36,866)		(37,805)
Gains from sale of real estate, net		—		114,107		46,966
Net income	$	10,622	$	121,691	$	46,474
Company’s share of net income	$	6,085	$	48,877	$	25,275