| SELF STORAGE PROPERTY ACQUISITIONS |
SELF STORAGE PROPERTY ACQUISITIONS
The Company acquired 76 self storage properties with an estimated fair value of $493.7 million during the nine months ended September 30, 2016. Of these acquisitions, 21 self storage properties with an estimated fair value of $157.6 million were acquired by the Company from its PROs. These self storage property acquisitions were accounted for as business combinations whereby the Company recognized the estimated fair value of the acquired assets and assumed liabilities on the respective dates of such acquisitions. The Company preliminarily allocated the total purchase price to the estimated fair value of tangible and intangible assets acquired, and liabilities assumed. 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 $12.4 million, resulting in a total fair value of $481.3 million allocated to real estate.
The following table summarizes the consideration for the business combinations completed by the Company during the nine months ended September 30, 2016 (dollars in thousands):
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Acquisitions Closed During the Three Months Ended: |
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Number of Properties |
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Summary of Consideration |
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Value of OP Equity(1)
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Liabilities Assumed (Assets Acquired) |
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Total Fair Value |
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Cash |
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Mortgages(2)
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Other |
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March 31, 2016 |
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17 |
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$ |
63,300 |
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$ |
19,068 |
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$ |
5,861 |
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$ |
584 |
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$ |
88,813 |
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June 30, 2016 |
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25 |
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61,263 |
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80,986 |
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55,767 |
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1,212 |
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199,228 |
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September 30, 2016 |
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34 |
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199,890 |
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4,841 |
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— |
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896 |
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205,627 |
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Total |
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76 |
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$ |
324,453 |
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$ |
104,895 |
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$ |
61,628 |
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$ |
2,692 |
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$ |
493,668 |
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(1) |
Value of OP equity represents the fair value of OP units, subordinated performance units and LTIP units. |
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(2) |
$12.2 million of the mortgages assumed in connection with self storage property acquisitions were subsequently repaid during the nine months ended September 30, 2016.
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The results of operations for these business combinations are included in the Company's statements of operations beginning on the respective closing date for each acquisition. For the three and nine months ended September 30, 2016, the accompanying statements of operations includes aggregate total revenue of $11.2 million and $19.4 million, respectively, and operating income of $1.3 million and $2.2 million, respectively, related to the 76 self storage properties acquired. Acquisition costs in the accompanying statements of operations include consulting fees, transaction expenses, and other costs related to business combinations, which amounted to $1.7 million and $4.7 million for the three and nine months ended September 30, 2016, respectively.
Pro Forma Financial Information
The pro forma financial information set forth below reflects incremental adjustments to the historical data of the Company to give effect to the acquisitions and related financing activities for (i) the two self storage properties discussed in Note 12 that were acquired subsequent to September 30, 2016, as if each acquisition had occurred on January 1, 2015, (ii) 32 of the 34 self storage properties acquired during the three months ended September 30, 2016, as if the acquisitions had occurred on January 1, 2015 (pro forma financial information is not presented for two of the self storage properties acquired during the three months ended September 30, 2016 since the information required is not available to the Company), (iii) the 25 self storage properties acquired during the three months ended June 30, 2016, as if the acquisitions had occurred on January 1, 2015, (iv) 15 of the 17 self storage properties acquired during the three months ended March 31, 2016, as if the acquisitions had occurred on January 1, 2015 (pro forma financial information is not presented for two of the self storage properties acquired during the three months ended March 31, 2016 since the information required is not available to the Company), (v) one of the 15 self storage properties acquired during the three months ended September 30, 2015, as if the acquisitions had occurred on January 1, 2014 (pro forma financial information is not presented for 14 of the self storage properties acquired during the three months ended September 30, 2015 since the information required is not available to the Company), (vi) the 21 self storage properties that were acquired during the three months ended June 30, 2015, as if each acquisition had occurred on January 1, 2014, and (vii) the six self storage properties that were acquired during the three months ended March 31, 2015, as if each had occurred on January 1, 2014.
As described in greater detail above, given that certain information with respect to the self storage properties the Company acquired is not available to the Company, readers of this Form 10-Q and investors are cautioned not to place undue reliance on the Company's pro forma financial information. The 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 a pro forma basis the results of operations for the three and nine months ended September 30, 2016 and 2015 (dollars in thousands):
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
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2016 |
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2015 |
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2016 |
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2015 |
Pro forma total revenue: |
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Historical results |
52,949 |
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35,678 |
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139,882 |
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95,619 |
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Acquisitions subsequent to September 30, 2016 |
419 |
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382 |
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1,206 |
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976 |
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Acquisitions during the three months ended September 30, 2016(1)
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1,664 |
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4,393 |
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11,317 |
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13,177 |
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Acquisitions during the three months ended June 30, 2016 |
— |
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5,053 |
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5,894 |
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14,791 |
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Acquisitions during the three months ended March 31, 2016(2)
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— |
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1,865 |
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842 |
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5,455 |
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Acquisitions during the three months ended September 30, 2015(3)
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— |
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109 |
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— |
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537 |
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Acquisitions during the three months ended June 30, 2015 |
— |
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— |
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— |
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3,782 |
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Acquisitions during the three months ended March 31, 2015 |
— |
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— |
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— |
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86 |
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Total |
$ |
55,032 |
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$ |
47,480 |
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$ |
159,141 |
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$ |
134,423 |
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Pro forma net income (loss):(4)
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Historical results |
7,944 |
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2,109 |
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18,791 |
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(569 |
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Acquisitions subsequent to September 30, 2016 |
77 |
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(98 |
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153 |
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(440 |
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Acquisitions during the three months ended September 30, 2016(1)
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759 |
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(1,214 |
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1,781 |
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(3,608 |
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Acquisitions during the three months ended June 30, 2016 |
1,268 |
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(610 |
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5,758 |
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(2,177 |
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
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2016 |
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2015 |
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2016 |
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2015 |
Acquisitions during the three months ended March 31, 2016(2)
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478 |
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(70 |
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2,548 |
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(2,162 |
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Acquisitions during the three months ended September 30, 2015(3)
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34 |
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53 |
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169 |
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3,047 |
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Acquisitions during the three months ended June 30, 2015 |
— |
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472 |
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1,055 |
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2,764 |
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Acquisitions during the three months ended March 31, 2015 |
— |
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317 |
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53 |
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1,525 |
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Total |
$ |
10,560 |
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$ |
959 |
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$ |
30,308 |
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$ |
(1,620 |
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(1) |
Reflects 32 of the 34 self storage properties acquired during this period because the information required with respect to the two remaining acquisitions during this period is not available to the Company.
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(2) |
Reflects 15 of the 17 self storage properties acquired during this period because the information required with respect to the two remaining acquisitions during this period is not available to the Company.
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(3) |
Reflects one of the 15 self storage properties acquired during this period because the information required with respect to the 14 remaining acquisitions during this period is not available to the Company.
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(4) |
Significant assumptions and adjustments in preparation of the pro forma information include the following: (i) for the cash portion of the purchase price, the Company assumed borrowings under the Company's revolving line of credit with interest computed based on the effective interest rate of 1.93% as of September 30, 2016; (ii) 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; and (iii) for acquisition costs of $4.7 million incurred during the nine months ended September 30, 2016, pro forma adjustments give effect to these costs as if they were incurred on January 1, 2015.
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