Annual report pursuant to Section 13 and 15(d)

RELATED PARTY TRANSACTIONS

v3.10.0.1
RELATED PARTY TRANSACTIONS
12 Months Ended
Dec. 31, 2018
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS
Supervisory and Administrative Fees
For the self storage properties that are managed by the PROs, the Company has entered into asset management agreements with the PROs to provide leasing, operating, supervisory and administrative services. The asset management agreements generally provide for fees ranging from 5% to 6% of gross revenue for the managed self storage properties. During the years ended December 31, 2018, 2017 and 2016, the Company incurred $16.9 million, $14.4 million and $11.0 million, respectively, for supervisory and administrative fees to the PROs. Such fees are included in general and administrative expenses in the accompanying statements of operations.
Payroll Services
For the self storage properties that are managed by the PROs, the employees responsible for operation of the self storage properties are generally employees of the PROs who charge the Company for the costs associated with the respective employees. For the years ended December 31, 2018, 2017 and 2016, the Company incurred $29.5 million, $24.6 million and $19.4 million, respectively, for payroll and related costs reimbursable to these PROs. Such costs are included in property operating expenses in the accompanying statements of operations.
Due Diligence Costs
During the years ended December 31, 2018, 2017 and 2016, the Company incurred $0.4 million, $0.7 million and $1.1 million, respectively, of expenses payable to certain PROs related to self storage property acquisitions sourced by the PROs. These expenses, which are based on the volume of transactions sourced by the PROs, are intended to reimburse the PROs for due diligence costs incurred in the sourcing and underwriting process. For the years ended December 31, 2018 and 2017 these due diligence costs are capitalized as part of the basis of the acquired self storage properties and for the year ended December 31, 2016, these due diligence costs are included in acquisition costs in the accompanying statements of operations.
Notes Receivable
 In connection with the acquisition of 16 self storage properties from PROs during the year ended December 31, 2014, the Company assumed certain mortgages that provided for interest at above-market rates. The sellers of the self storage properties agreed to reimburse the Company for the difference between the fair value and the contractual value of the assumed mortgages which amounted to $5.2 million. Due to the structure of the transaction, the amount owed to the Company was considered a receivable for the issuance of equity and was recorded as an offset against equity. During the years ended December 31, 2018 and 2017, the Company received above-market interest reimbursements from the sellers totaling $1.2 million and $1.3 million, respectively.
In addition, in exchange for $1.2 million and $1.3 million of principal payment reimbursements received related to these assumed mortgages during the years ended December 31, 2018 and 2017, the Company issued 44,502 and 47,339 OP units to the sellers during the year ended December 31, 2018 and 2017.
Self Storage Property Acquisitions
During the year ended December 31, 2018, the Company issued 11,490 subordinated performance units to an affiliate of Personal Mini (the Company's chairman and chief executive officer, Arlen D. Nordhagen, has a noncontrolling minority ownership interest in this affiliate of Personal Mini), for $0.3 million of co-investment related to the acquisition of a self storage property from an unrelated third party.
During the year ended December 31, 2018, the Company issued 19,047 OP units and 5,824 subordinated performance units as partial consideration for the acquisition of self storage properties to an affiliate of Northwest and an affiliate of Kevin Howard, a member of the Company's board of trustees.