UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20142016
Commission File Number:
1-13820 (Life Storage, Inc.)
0-24071 (Life Storage LP)
SOVRAN SELFLIFE STORAGE, INC.
LIFE STORAGE LP
(Exact name of Registrant as specified in its charter)
Maryland (Life Storage, Inc.) Delaware (Life Storage LP) | 16-1194043 (Life Storage, Inc.) 16-1481551 (Life Storage LP) | |
(State of incorporation or organization) | (I.R.S. Employer Identification No.) |
6467 Main Street
Williamsville, NY 14221
(Address of principal executive offices) (Zip code)
(716) 633-1850
(Registrant’s telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Securities | Exchanges on which Registered | |
Common Stock, $.01 Par Value | New York Stock Exchange |
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
Life Storage, Inc. | Yes ☒ No ☐ | |
Life Storage LP | Yes ☒ No ☐ |
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No x
Life Storage, Inc. | Yes ☐ No ☒ | |
Life Storage LP | Yes ☐ No ☒ |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Life Storage, Inc. | Yes ☒ No ☐ | |
Life Storage LP | Yes ☒ No ☐ |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Life Storage, Inc. | Yes ☒ No ☐ | |
Life Storage LP | Yes ☒ No ☐ |
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.x
Life Storage, Inc. | ☐ | |
Life Storage LP | ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Life Storage, Inc.: | Large accelerated filer | Accelerated filer ☐ | ||||||
Non-accelerated filer | Smaller reporting company ☐ | |||||||
Life Storage LP: | Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller reporting company ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Life Storage, Inc. | Yes ☐ No ☒ | |
Life Storage LP | Yes ☐ No ☒ |
As of June 30, 2014, 33,240,9302016, 46,369,391 shares of Life Storage, Inc.’s Common Stock, $.01 par value per share, were outstanding, and the aggregate market value of the Common Stock held by non-affiliates of Life Storage, Inc. was approximately $2,505,480,768$4,779,975,682 (based on the closing price of the Common Stock on the New York Stock Exchange on June 30, 2014)2016).
As of February 13, 2015, 34,174,7722017, 46,487,121 shares of Common Stock, $.01 par value per share, were outstanding.
As of June 30, 2016, the aggregate market value of the 196,008 units of limited partnership (the “OP Units”) held by non-affiliates of Life Storage LP was $20,565,159 (based on the closing price of the Common Stock of Life Storage, Inc., the sole general partner of Life Storage LP, on the New York Stock Exchange on June 30, 2016). (For this calculation, the market value of all OP Units beneficially owned by Life Storage, Inc. has been excluded.)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for the 20152017 Annual Meeting of Shareholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’sregistrants’ fiscal year ended December 31, 2014.2016.
EXPLANATORY NOTE
This report combines the annual reports on Form 10-K for the year ended December 31, 2016 of Life Storage, Inc., formerly known as Sovran Self Storage, Inc. (the “Parent Company”) and Life Storage LP, formerly known as Sovran Acquisition Limited Partnership (the “Operating Partnership”). The Parent Company is a real estate investment trust, or REIT, that owns its assets and conducts its operations through the Operating Partnership, a Delaware limited partnership, and subsidiaries of the Operating Partnership. Effective August 15, 2016, the Parent Company changed its name from “Sovran Self Storage, Inc.” to “Life Storage, Inc.” and the Operating Partnership changed its name from “Sovran Acquisition Limited Partnership” to “Life Storage LP”. The Parent Company, the Operating Partnership and their consolidated subsidiaries are collectively referred to in this report as the “Company.” In addition, terms such as “we,” “us,” or “our” used in this report may refer to the Company, the Parent Company and/or the Operating Partnership.
Life Storage Holdings, Inc., a wholly-owned subsidiary of the Parent Company (“Holdings”), is the sole general partner of the Operating Partnership; the Parent Company is a limited partner of the Operating Partnership, and through its ownership of Holdings and its limited partnership interest, controls the operations of the Operating Partnership, holding a 99.5% ownership interest therein as of December 31, 2016. The remaining ownership interests in the Operating Partnership are held by certain former owners of assets acquired by the Operating Partnership. As the owner of the sole general partner of the Operating Partnership, the Parent Company has full and complete authority over the Operating Partnership’s day-to-day operations and management.
Management operates the Parent Company and the Operating Partnership as one enterprise. The management teams of the Parent Company and the Operating Partnership are identical.
There are few differences between the Parent Company and the Operating Partnership, which are reflected in the note disclosures in this report. The Company believes it is important to understand the differences between the Parent Company and the Operating Partnership in the context of how these entities operate as a consolidated enterprise. The Parent Company is a REIT, whose only material asset is its ownership of the partnership interests of the Operating Partnership. As a result, the Parent Company does not conduct business itself, other than acting as the owner of the sole general partner of the Operating Partnership, issuing public equity from time to time and guaranteeing the debt obligations of the Operating Partnership. The Operating Partnership holds substantially all the assets of the Company and, directly or indirectly, holds the ownership interests in the Company’s real estate ventures. The Operating Partnership conducts the operations of the Company’s business and is structured as a partnership with no publicly traded equity. Except for net proceeds from equity issuances by the Parent Company, which are contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required by the Company’s business through the Operating Partnership’s operations, by the Operating Partnership’s direct or indirect incurrence of indebtedness or through the issuance of partnership units of the Operating Partnership.
The substantive difference between the Parent Company’s and the Operating Partnership’s filings is the fact that the Parent Company is a REIT with public equity, while the Operating Partnership is a partnership with no publicly traded equity. In the financial statements, this difference is primarily reflected in the equity (or capital for the Operating Partnership) section of the consolidated balance sheets and in the consolidated statements of equity (or capital). Apart from the different equity treatment, the consolidated financial statements of the Parent Company and the Operating Partnership are nearly identical.
The Company believes that combining the annual reports on Form 10-K of the Parent Company and the Operating Partnership into a single report will:
In order to highlight the differences between the Parent Company and the Operating Partnership, the separate sections in this report for the Parent Company and the Operating Partnership specifically refer to the Parent Company and the Operating Partnership. In the sections that combine disclosures of the Parent Company and the Operating Partnership, this report refers to such disclosures as those of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and real estate ventures and holds assets and debt, reference to the Company is appropriate because the business is one enterprise and the Parent Company operates the business through the Operating Partnership.
As the owner of the general partner with control of the Operating Partnership, the Parent Company consolidates the Operating Partnership for financial reporting purposes, and the Parent Company does not have significant assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities of the Parent Company and the Operating Partnership are the same on their respective financial statements. The separate discussions of the Parent Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company’s operations on a consolidated basis and how management operates the Company.
This report also includes separate Item 9A - Controls and Procedures sections, signature pages and Exhibit 31 and 32 certifications for each of the Parent Company and the Operating Partnership in order to establish that the Chief Executive Officer and the Chief Financial Officer of the Parent Company and the Chief Executive Officer and the Chief Financial Officer of the Operating Partnership have made the requisite certifications and that the Parent Company and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended and 18 U.S.C. §1350.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||||||||
Item 7A. Quantitative and Qualitative Disclosures About Market Risk | ||||||||
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | ||||||||
Item 10. Directors, Executive Officers and Corporate Governance | ||||||||
Item 13. Certain Relationships and Related Transactions, and Director Independence | ||||||||
91 | ||||||||
92 | ||||||||
EX-10.1 | ||||||||
EX-10.5 | ||||||||
EX-10.8 | ||||||||
EX-10.11 | ||||||||
EX-12.1 | ||||||||
EX-21.1 | ||||||||
EX-23.1 | ||||||||
EX-23.2 | ||||||||
EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32.1 | ||||||||
EX-101 |
When used in this discussion and elsewhere in this document, the words “intends,” “believes,” “expects,” “anticipates,” and similar expressions are intended to identify “forward-looking statements” within the meaning of that term in Section 27A of the Securities Act of 1933 and in Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the effect of competition from new self-storage facilities, which would cause rents and occupancy rates to decline; the Company’s ability to evaluate, finance and integrate acquired businesses into the Company’s existing business and operations; the Company’s ability to effectively compete in the industry in which it does business; the Company’s existing indebtedness may mature in an unfavorable credit environment, preventing refinancing or forcing refinancing of the indebtedness on terms that are not as favorable as the existing terms; interest rates may fluctuate, impacting costs associated with the Company’s outstanding floating rate debt; the Company’s ability to comply with debt covenants; any future ratings on the Company’s debt instruments; regional concentration of the Company’s business may subject it to economic downturns in the states of Florida and Texas; the Company’s reliance on its call center; the Company’s cash flow may be insufficient to meet required payments of operating expenses, principal, interest and dividends; and tax law changes that may change the taxability of future income.
Item 1. | Business |
SovranEffective August 15, 2016, the Parent Company changed its name from “Sovran Self Storage, Inc. together” to “Life Storage, Inc.” and the Operating Partnership changed its name from “Sovran Acquisition Limited Partnership” to “Life Storage LP”. Also, consistent with its directthese name changes, and indirect subsidiariesin connection with the rebranding of our storage facilities from “Uncle Bob’s Self Storage®” to “Life Storage®”, the name of the general partner of the Operating Partnership has been changed from “Sovran Holdings, Inc.” to “Life Storage Holdings, Inc.” and its consolidated joint ventures,the name of the Parent Company’s taxable REIT subsidiary changed from “Uncle Bob’s Management, LLC” to “Life Storage Solutions, LLC”. This name change is intended to be responsive to the extent appropriatechanging demographics and consumer trends in the applicable context, (the “Company,self-storage industry. We believe that the change to the “Life Storage®” “We,name will allow the Company to continue to maintain its position as a leader in the U.S. self-storage industry and may provide additional growth opportunities that may not have been available under the “Uncle Bob’s Self Storage®” “Our,” or “Sovran”)name.
The Company is a self-administered and self-managed real estate investment trust (“REIT”)company that acquires, owns and manages self-storage properties. We refer to the self-storage properties in which we have an ownership interest, lease, and/or are managed by us as “Properties.” We began operations on June 26, 1995. We were formed to continue the business of our predecessor company, which had engaged in the self-storage business since 1985. At December 31, 2014,2016, we heldhad an ownership interestsinterest in leased, and/or managed 518 Properties consisting of approximately 35.5 million net rentable square feet, situated659 self-storage properties in 25 states.29 states under the names Life Storage® and Uncle Bob’s Self Storage®. Among our 518659 self-storage properties are 39 properties that we manage for an unconsolidated joint venture (Sovran HHF Storage Holdings LLC) of which we are a 20% owner, 30 properties that we manage for an unconsolidated joint venture (Sovran HHF Storage Holdings II LLC) of which we are a 15% owner, 17and 26 properties that we manage and in which have no ownership interest, andinterest. We are also a 20% owner in an unconsolidated joint venture (191 III Life Storage Holdings LLC) which acquired four properties in January 2017 that we lease.have managed since acquisition. We believe we are the fifth largest operator of self-storage properties in the United States based on square feet owned and managed. OurAll of our Properties will conduct business under the user-friendlycustomer-friendly name Life Storage®. At December 31, 2016, there remain stores in certain markets that continue to operate under the name Uncle Bob’s Self-Storage®.Self Storage® and will continue to do so until our transition to the Life Storage® name is complete in the first half of 2017.
At December 31, 2014, we own2016, the Parent Company owned an indirect interest in 497633 of the Properties through a limited partnership (the “Partnership”).the Operating Partnership, which excludes the 26 properties that we manage and have no ownership interest. Included in the 497633 properties are the 69 facilities in our unconsolidated joint ventures. At December 31, 2014 the Partnership also leased, but had no ownership in, four facilities under a long-term lease with the option to buy the facilities during a 16 month window starting in February 2015. The Partnership exercised its option to purchase the properties and acquired the four facilities for $120 million in February 2015. In total, we own a 99.5% economic interest in the Operating Partnership and unaffiliated third parties own collectively a 0.5% limited partnership interest at December 31, 2014.2016. We believe that this structure, commonly known as an umbrella partnership real estate investment trust (“UPREIT”), facilitates our ability to acquire properties by using units of the Operating Partnership as currency. By utilizing interests in the Operating Partnership as currency in facility acquisitions, we may partially defer the seller’s income tax liability which in turn may allow us to obtain more favorable pricing.
We were
The Parent Company was incorporated on April 19, 1995 under Maryland law. The Operating Partnership was formed on April 19, 1995 as a Delaware limited partnership and has engaged in virtually all aspects of the self-storage business, including the development, acquisition, management, ownership and operation of self-storage facilities. Our principal executive offices are located at 6467 Main Street, Williamsville, New York 14221, our telephone number is (716) 633-1850 and our website iswebsites arewww.lifestorage.com andwww.unclebobs.com.
We seek to enhance shareholder value through internal growth and acquisition of additional storage properties. Internal growth is achieved through aggressive property management: optimizing rental rates, increasing occupancy levels, controlling costs, maximizing collections, and strategically expanding and enhancing the
Properties. Should economic conditions warrant, we may develop new properties. We believe that there continue to be opportunities for growth through acquisitions, and constantly seek to acquire self-storage properties that are susceptible to realization of increased economies of scale and improved performance through application of our expertise.
Industry Overview
We believe that self-storage facilities offer inexpensive storage space to residential and commercial users. In addition to fully enclosed and secure storage space, many facilities also offer outside storage for automobiles, recreational vehicles and boats. Better facilities, such as those owned and/or managed by the Company, are usually fenced and well lighted with automated access systems, surveillance cameras, and have a full-time manager. Our customers rent space on a month-to-month basis and typically have access to their storage space up to 15 hours a day and in certain circumstances are provided with 24-hour access. Individual storage spaces are secured by the customer’s lock, and the customer has sole control of access to the space.
According to the 20152017 Self-Storage Almanac, of the approximatelyestimated 51,000 facilities in the United States (including both core and non-core storage businesses), approximately 13%15.0% are managed by the ten largest operators. The remainder of the industry is characterized by numerous small, local operators. The scarcity of capital available to small operators for acquisitions and expansions, internet marketing, and call centers, and the potential for savings through economies of scale are factors that are leading to consolidation in the industry. We believe that, as a result of this trend, significant growth opportunities exist for operators with proven management systems and sufficient capital resources to grow either through acquisitions or third party management platforms.
Property Management
We have nearly 3031 years of experience managing self storageself-storage facilities, and the combined experience of our key personnel makes us one of the leaders in the industry. All of our stores conduct business under the customer-friendly names Life Storage® or Uncle Bob’s Self Storage®. At December 31, 2016, there remain stores in certain markets that continue to operate under the user-friendly name of Uncle Bob’s Self Storage®,Storage® and wewill continue to do so until our full transition to the Life Storage® name is complete in the first half of 2017. We employ the following strategies with respect to our property management:
Our People:
We recognize the importance of quality people to the success of an organization. Accordingly, we hire and train to ensure that all associates can reach their full potential. Each strives to conduct themselves in accordance with our core values: Teamwork, Respect, Accountability, Integrity, and Innovation. In turn, we support them with state of the art training tools including an online learning management system, a company intranet and a network of certified training personnel. Every store team also has frequent, and sometimes daily, interaction with an Area Manager, a Regional Vice President, an Accounting Representative, and other support personnel. As such, our store associates are held to high standards for customer service, store appearance, financial performance, and overall operations.
Training & Development:
Our employees benefit from a wide array of training and development opportunities. New store employees undergo a comprehensive, proprietary training program designed to drive sales and operational results while ensuring the delivery of quality customer service. To supplement their initial training, employees enjoy continuing edification, coaching, and performance feedback throughout their tenure.
All learning and development activities are facilitated through our online Learningtraining and Performance Management System internally named eBOB. eBOBdevelopment portal. This portal delivers and tracks hundreds of on-demand computer based training and compliance courses; it also administers tests, surveys, and the employee appraisal process. Sovran’sLife Storage’s training and development program encompasses the tools and support we deem essential to the success of our employees and business.
Marketing and Advertising:
We believe the avenues for attracting and capturing new customers have changed dramatically over the years. As such, we have implemented the following strategies to market our properties and increase profitability:
Ancillary Income:
We know that our 275,000360,000 customers require more than just a storage space. Knowing this, we offer a wide range of other products and services that fulfill their needs while providing us with ancillary income. Whereas our Uncle Bob’sLife Storage trucks are available with no rental charge for new move-in customers, they are available for rent to non-customers and existing customers. We also rent moving dollies and blankets, and we carry a wide assortment of moving and packing supplies including boxes, tape, locks, and other essential items. For those customers who do not carry storage insurance, we make available renters insurance through a third party carrier, on which we earn a commission.an administrative fee. We also receive incidental income from billboards and cell towers.
Information Systems:
Each of our primary business functions is linked to our customized computer applications, many of which are proprietary. These systems provide for consistent, timely and accurate flow of information throughout our critical platforms:
Revenue Management:
Our proprietary revenue management system is constantly evolving through the efforts of our revenue management team comprised of a group of analysts. We have the ability to change pricing instantaneously for any one unit type, at any single location, based on the occupancy, competition, and forecasted changes in demand. By analyzing current customer rent tenures, we can implement rental rate increases at optimal times to increase revenues. Advanced pricing analytics enables us to reduce the amount of concessions, attracting a more stable customer base and discouraging short-term price shoppers. This system continues to drive revenuesrevenue stability and/or growth throughout our portfolio.
Property Maintenance:
We take great pride in the appearance and structural integrity of our Properties. All of our Properties go through a thorough annual inspection performed by experienced Project Managers. Those inspections provide the basis for short and long term planned projects that are all performed under a standardized set of specifications. Routine maintenance such as landscaping, pest control, and snowplowing is contracted to local providers who have a clear understanding of our standards. Further, our software tracks repairs, monitors contractor performance and measures the useful life of assets. As with many other aspects of our Company, our size has allowed us to enjoy relatively low maintenance costs because we have the benefit of economies of scale in purchasing, travel, and overhead absorption. In addition, we continually look to green alternatives and implement energy saving alternatives as new technology becomes available. This includes the installation of solar panels, and LED lighting, energy efficient air conditioning units, and cool roofs which are bothall environmentally friendly and have the potential to reduce energy consumption (thereby reducing costs) in the buildings in which they are installed. We continue to implement and expand the Company’s solar panel initiative which has reduced energy consumption and costs at those installed locations.
Environmental and Other Regulations
We are subject to federal, state, and local environmental regulations that apply generally to the ownership of real property. We have not received notice from any governmental authority or private party of any material environmental noncompliance, claim, or liability in connection with any of the Properties, and are not aware of any environmental condition with respect to any of the Properties that could have a material adverse effect on our financial condition or results of operations.
The Properties are also generally subject to the same types of local regulations governing other real property, including zoning ordinances. We believe that the Properties are in substantial compliance with all such regulations.
Insurance
Each of the Properties is covered by fire and property insurance (including comprehensive liability)liability and business interruption), and all-risk property insurance policies, which are provided by reputable companies and on commercially reasonable terms. In addition, we maintain a policy insuring against environmental liabilities resulting from tenant storage on terms customary for the industry, and title insurance insuring fee title to the Company-owned Properties in an amount that we believe to be adequate.
Federal Income Tax
We operate, and we intend to continue to operate, in such a manner as to continue to qualify as a REIT under the Internal Revenue Code of 1986 (the “Code”), but no assurance can be given that we will at all times so qualify. To the extent that we continue to qualify as a REIT, we will not be taxed, with certain limited exceptions, on the taxable income that is distributed to our shareholders. We have elected to treat one of our subsidiaries as a taxable
REIT subsidiary. In general, our taxable REIT subsidiary may perform additional services for customers and generally may engage in certain real estate or non-real estate related business. Our taxable REIT subsidiary is subject to corporate federal and state income taxes. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - REIT Qualification and Distribution Requirements.”
Competition
The primary factors upon which competition in the self-storage industry is based are location, rental rates, suitability of the property’s design to prospective customers’ needs, and the manner in which the property is operated and marketed. We believe we compete successfully on these bases. The extent of competition depends significantly on local market conditions. We seek to locate facilities in a manner in which we can increase market share while not adversely affecting any of our existing locations in that market. However, the number of self-storage facilities in a particular area could have a material adverse effect on the performance of any of the Properties.
Several of our competitors are larger and have substantially greater financial resources than we do. These larger operators may, among other possible advantages, be capable of greater leverage and the payment of higher prices for acquisitions.
Investment Policy
While we emphasize equity real estate investments, we may, at our discretion, invest in mortgage and other real estate interests related to self-storage properties in a manner consistent with our qualification as a REIT. We may also retain a purchase money mortgage for a portion of the sale price in connection with the disposition of Properties from time to time. Should investment opportunities become available, we may look to acquire self-storage properties via a joint-venture partnership or similar entity. We may or may not elect to have a significant investment in such a venture, but would use such an opportunity to expand our portfolio of branded and managed properties.
Subject to the percentage of ownership limitations and gross income tests necessary for REIT qualification, we also may invest in securities of entities engaged in real estate activities or securities of other issuers, including for the purpose of exercising control over such entities.
Disposition Policy
Any disposition decision of our Properties is based on a variety of factors, including, but not limited to, the (i) potential to continue to increase cash flow and value, (ii) sale price, (iii) strategic fit with the rest of our portfolio, (iv) potential for, or existence of, environmental or regulatory issues, (v) alternative uses of capital, and (vi) maintaining qualification as a REIT.
During 2016, we sold eight non-strategic properties in Alabama, Georgia, Mississippi, Texas and Virginia for net proceeds of approximately $34.1 million, resulting in a gain of approximately $15.3 million. During 2015, we sold three non-strategic storage facilities purchased during 2014 and 2015 in Missouri and South Carolina for net proceeds of approximately $4.6 million, resulting in a loss of approximately $0.5 million. During 2014, we sold two non-strategic storage facilities in Texas for net proceeds of approximately $11.0 million resulting in a gain of approximately $5.2 million. During 2013, we sold four non-strategic storage facilities in Florida, Ohio, and Virginia for net proceeds of approximately $11.7 million resulting in a gain of approximately $2.4 million. During 2012, we sold 17 non-strategic storage facilities in Maryland, Michigan, and Texas for net proceeds of approximately $47.7 million resulting in a gain of approximately $4.5 million.
Distribution Policy
We intend to pay regular quarterly distributions to our shareholders. However, future distributions by us will be at the discretion of the Board of Directors and will depend on the actual cash available for distribution, our financial condition and capital requirements, the annual distribution requirements under the REIT provisions of the Code and such other factors as the Board of Directors deems relevant. In order to maintain our qualification as a REIT, we must make annual distributions to shareholders of at least 90% of our REIT taxable income (which does not include capital gains). Under certain circumstances, we may be required to make distributions in excess of cash available for distribution in order to meet the minimum requirements.
Financing Policy
Our Board of Directors currently limits the amount of debt that may be incurred by us to less than 50% of the sum of the market value of our issued and outstanding Common and Preferred Stock plus our debt. We, however, may from time to time re-evaluate and modify our borrowing policy in light of then current economic
conditions, relative costs of debt and equity capital, market values of properties, growth and acquisition opportunities and other factors. In addition to our Board of Directors’ debt limits, our most restrictive debt covenants limit our leverage. However, we believe cash flow from operations, access to the capital markets and access to our credit facility, as described below, are adequate to execute our current business plan and remain in compliance with our debt covenants.
We have a $300$500 million revolving line of credit bearing interest at a variable rate equal to LIBOR plus a margin based on the Company’s credit rating (at December 31, 20142016 the margin was 1.30%1.10%). At December 31, 2014,2016, there was $250.3$247 million available on the unsecured line of credit without considering the additional availability under the credit facility expansion feature.credit. The revolving line of credit has a maturity date of December 10, 2019.
In 2014,On March 3, 2015, the Parent Company completed the public offering of 1,380,000 shares of its common stock at $90.40 per share. Net proceeds to the Company utilizedafter deducting underwriting discounts and commissions and offering expenses were approximately $119.5 million. The Company used the net proceeds from the offering to repay a portion of the indebtedness outstanding on the Company’s unsecured line of credit.
On January 20, 2016, the Company completed the public offering of 2,645,000 shares of its common stock at $105.75 per share. Net proceeds to the Company after deducting underwriting discounts and commissions and offering expenses were approximately $269.7 million. The Company used the net proceeds from the offering to repay a portion of the indebtedness then outstanding on the Company’s unsecured line of credit.
On May 25, 2016, the Company completed the public offering of 6,900,000 shares of its common stock at $100.00 per share. Net proceeds to the Company after deducting underwriting discounts and commissions and offering expenses were approximately $665.4 million.
On June 20, 2016, the Company issued $600 million in aggregate principal amount of 3.50% unsecured senior notes due July 1, 2026 (the “2026 Senior Notes”). Net proceeds to the Company after original issue discount, underwriting discounts and commissions and offering expenses were approximately $591.2 million. On July 15, 2016, the proceeds from the 2026 Senior Notes, the proceeds from the Company’s common stock offering in May 2016, and draws on the Company’s line of credit were used to fund the acquisition of LifeStorage, LP. In conjunction with the issuance of the 2026 Senior Notes, the Company settled its $150 million notional forward starting swap agreements for cash of approximately $9.2 million.
On July 21, 2016, the Company entered into a $200 million term note maturing July 21, 2028 bearing interest at a fixed rate of 3.67%. The proceeds from this term note were used to repay a portion of the then outstanding balance on the Company’s line of credit.
During 2015, the Company also issued 949,911 shares of common stock under the Company’s continuous equity offering program (“Equity Program”) pursuant to which we could sell from time to time up to $225 million in aggregate offeringat a weighted average issue price of shares$96.80 per share, generating net proceeds of our common stock.$90.6 million. During 2014, we issued approximately 0.9 million924,403 shares under the Equity Program and 0.3 million359,102 shares under our previous Equity Program for net proceeds of approximately $99.2 million. During 2013, we issued approximately 1.67 million2016, the Company did not issue any shares of common stock under our previousthe Equity Program for net proceeds of approximately $107.8 million. During 2012 we issued approximately 1.39 million shares under our previous Equity Program for net proceeds of approximately $75.3 million.Program. As of December 31, 2014,2016, the Company has$151.3 $59.3 million availability for issuance of shares under the current Equity Program.Program which expires in May 2017.
To the extent that we desire to obtain additional capital to pay distributions, to provide working capital, to pay existing indebtedness or to finance acquisitions, expansions or development of new properties, we may utilize amounts available under the line of credit, common or preferred stock offerings, floating or fixed rate debt financing, retention of cash flow (subject to satisfying our distribution requirements under the REIT rules) or a combination of these methods. Additional debt financing may also be obtained through mortgages on our Properties, which may be recourse, non-recourse, or cross-collateralized and may contain cross-default provisions. We have not established any limit on the number or amount of mortgages that may be placed on any single Property or on our portfolio as a whole, although certain of our existing term loans contain limits on overall mortgage indebtedness. For additional information regarding borrowings, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Operations—Liquidity and Capital Resources” and Note 76 to the Consolidated Financial Statements filed herewith.
Employees
We currently employ a total of 1,3781,537 employees, including 518659 property managers, 3345 area managers, and 631581 associate managers and part-time employees. At our headquarters, in addition to our six senior executive officers, we employ 190246 people engaged in various support activities, including accounting, human resources, customer care, and management information systems. None of our employees are covered by a collective bargaining agreement. We consider our employee relations to be excellent.
Available Information
We file with the U.S. Securities and Exchange Commission quarterly and annual reports on Forms 10-Q and 10-K, respectively, current reports on Form 8-K, and proxy statements pursuant to the Securities Exchange Act
of 1934, in addition to other information as required. The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1 (800) SEC-0330. We file this information with the SEC electronically, and the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available free of charge on our web site athttp://www.unclebobs.comwww.lifestorage.com as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. In addition, our Codes of Ethics and Charters of our Governance Committee, Audit Committee, and Compensation Committee are available free of charge on our website athttp://www.unclebobs.comwww.lifestorage.com.
Also, copies of our annual report and Charters of our Governance Committee, Audit Committee, and Compensation Committee will be made available, free of charge, upon written request to Sovran SelfLife Storage, Inc., Attn: Investor Relations, 6467 Main Street, Williamsville, NY 14221.
Item 1A. | Risk Factors |
You should carefully consider the risks described below, together with all of the other information included in or incorporated by reference into our Form 10-K, as part of your evaluation of the Company. If any of the following risks actually occur, our business could be harmed. In such case, the trading price of our securities could decline, and you may lose all or part of your investment.
Our Acquisitions May Not Perform as Anticipated
We have completed hundreds of acquisitions of self-storage facilities since our initial public offering of common stock in June 1995. Our strategy is to continue to grow by acquiring additional self-storage facilities. Acquisitions entail risks that investments will fail to perform in accordance with our expectations. Our judgments with respect to the prices paid for acquired self-storage facilities and the costs of any improvements required to bring an acquired property up to our standards may prove to be inaccurate. Acquisitions also involve general investment risks associated with any new real estate investment.
We May Incur Problems with Our Real Estate Financing
Unsecured Credit Facility, Term Notes and TermSenior Notes.We have a line of credit and term note agreements with a syndicate of financial institutions and other lenders.lenders, along with senior debt of $600 million. This unsecured credit facility and the term notes areindebtedness is recourse to us and the required payments are not reduced if the economic performance of any of the properties declines. The unsecured credit facility limitsfacilities limit our ability to make distributions to our shareholders, except in limited circumstances.
Rising Interest Rates. Indebtedness that we incur under the unsecured credit facility and bank term notes bears interest at a variable rate. Accordingly, increases in interest rates could increase our interest expense, which would reduce our cash available for distribution and our ability to pay expected distributions to our shareholders. We manage our exposure to rising interest rates using interest rate swaps and other available mechanisms. If the amount of our indebtedness bearing interest at a variable rate increases, our unsecured credit facility may require us to enter into additional interest rate swaps.
Refinancing May Not Be Available.It may be necessary for us to refinance our term notes and our unsecured credit facilityindebtedness through additional debt financing or equity offerings. If we were unable to refinance this indebtedness on acceptable terms, we might be forced to dispose of some of our self-storage facilities upon disadvantageous terms, which might result in losses to us and might adversely affect the cash available for distribution. If prevailing interest rates or other factors at the time of refinancing result in higher interest rates on refinancings, our interest expense would increase, which would adversely affect our cash available for distribution and our ability to pay expected distributions to shareholders.
Covenants and Risk of Default. Our unsecured credit facility and term notesloan instruments require us to operate within certain covenants, including financial covenants with respect to leverage, fixed charge coverage, minimum net worth, limitations on additional indebtedness and dividend limitations. If we violate any of these covenants or otherwise default under our unsecured credit facility or term notes,these instruments, then our lenders could declare all indebtedness under these facilities to be immediately due and payable which would have a material adverse effect on our business and could require us to sell self-storage facilities under distressed conditions and seek replacement financing on substantially more expensive terms.
Reduction in or Loss of Credit Rating.Certain of our debt instruments require us to maintain an investment grade rating from at least one and in some cases two debt ratings agencies. Should we fail to attain an investment gradereceive a reduction in our credit rating from the agencies, the interest rate on our line of credit would increase by 0.30%,up to 0.50% and the interest rate on $325 million of our bank term notes would increase by 0.40%, andup to 0.65%. Should we fail to attain an investment grade rating from the agencies, the interest rates on our $150 million term note due 2016, our $100 million term note due 2021 and our $175 million term note due 2024 would each increase by 1.750%.
Our Debt Levels May Increase
Our Board of Directors currently has a policy of limiting the amount of our debt at the time of incurrence to less than 50% of the sum of the market value of our issued and outstanding common stock and preferred stock plus the amount of our debt at the time that debt is incurred. However, our organizational documents do not contain any limitation on the amount of indebtedness we might incur. Accordingly, our Board of Directors could alter or eliminate the current policy limitation on borrowing without a vote of our shareholders. We could become highly leveraged if this policy were changed. However, our ability to incur debt is limited by covenants in our bank credit arrangements.debt instruments.
We Are Subject to the Risks Posed by Fluctuating Demand and Significant Competition in the Self-Storage Industry
Our self-storage facilities are subject to all operating risks common to the self-storage industry. These risks include but are not limited to the following:
Our current strategy is to acquire interests only in self-storage facilities. Consequently, we are subject to risks inherent in investments in a single industry. Our self-storage facilities compete with other self-storage facilities in their geographic markets. As a result of competition, the self-storage facilities could experience a decrease in occupancy levels and rental rates, which would decrease our cash available for distribution. We compete in operations and for acquisition opportunities with companies that have substantial financial resources. Competition may reduce the number of suitable acquisition opportunities offered to us and increase the bargaining power of property owners seeking to sell. The self-storage industry has at times experienced overbuilding in response to perceived increases in demand. A recurrence of overbuilding might cause us to experience a decrease in occupancy levels, limit our ability to increase rents, and compel us to offer discounted rents.
Our Real Estate Investments Are Illiquid and Are Subject to Uninsurable Risks and Government Regulation
General Risks. Our investments are subject to varying degrees of risk generally related to the ownership of real property. The underlying value of our real estate investments and our income and ability to make distributions to our shareholders are dependent upon our ability to operate the self-storage facilities in a manner sufficient to maintain or increase cash available for distribution. Income from our self-storage facilities may be adversely affected by the following factors:
Illiquidity of Real Estate May Limit its Value. Real estate investments are relatively illiquid. Our ability to vary our portfolio of self-storage facilities in response to changes in economic and other conditions is limited. In addition, provisions of the Code may limit our ability to profit on the sale of self-storage facilities held for fewer than two years. We may be unable to dispose of a facility when we find disposition advantageous or necessary and the sale price of any disposition may not equal or exceed the amount of our investment.
Uninsured and Underinsured Losses Could Reduce the Value of our Self Storage Facilities. Some losses, generally of a catastrophic nature, that we potentially face with respect to our self-storage facilities may be uninsurable or not insurable at an acceptable cost. Our management uses its discretion in determining amounts, coverage limits and deductibility provisions of insurance, with a view to acquiring appropriate insurance on our investments at a reasonable cost and on suitable terms. These decisions may result in insurance coverage that, in the event of a substantial loss, would not be sufficient to pay the full current market value or current replacement cost of our lost investment. Inflation, changes in building codes and ordinances, environmental considerations, and other factors also might make it infeasible to use insurance proceeds to replace a property after it has been damaged or destroyed. Under those circumstances, the insurance proceeds received by us might not be adequate to restore our economic position with respect to a particular property.
Possible Liability Relating to Environmental Matters. Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under, or in that property. Those laws often impose liability even if the owner or operator did not cause or know of the presence of hazardous or toxic substances and even if the storage of those substances was in violation of a customer’s lease. In addition, the presence of hazardous or toxic substances, or the failure of the owner to address their presence on the property, may adversely affect the owner’s ability to borrow using that real property as collateral. In connection with the ownership of the self-storage facilities, we may be potentially liable for any of those costs.
Americans with Disabilities Act. The Americans with Disabilities Act of 1990, or ADA, generally requires that buildings be made accessible to persons with disabilities. A determination that we are not in compliance with the ADA could result in imposition of fines or an award of damages to private litigants. If we were required to make modifications to comply with the ADA, our results of operations and ability to make expected distributions to our shareholders could be adversely affected.
There Are Limitations on the Ability to Change Control of Sovranthe Company
Limitation on Ownership and Transfer of Shares. To maintain our qualification as a REIT, not more than 50% in value of our outstanding shares of stock may be owned, directly or indirectly, by five or fewer individuals, as defined in the Code. To limit the possibility that we will fail to qualify as a REIT under this test, our Amended and Restated Articles of Incorporation (“Articles of Incorporation”) include ownership limits and transfer restrictions on shares of our stock. Our Articles of Incorporation limit ownership of our issued and outstanding stock by any single shareholder to 9.8% of the aggregate value of our outstanding stock, except that the ownership by some of our shareholders is limited to 15%.
These ownership limits may:
Our Board of Directors may waive the ownership limits if it is satisfied that ownership by those shareholders in excess of those limits will not jeopardize our status as a REIT under the Code or in the event it determines that it is no longer in our best interests to be a REIT. Waivers have been granted to the former holders of our Series C preferred stock, FMR Corporation, Cohen & Steers, Inc. and Invesco Advisers, Inc. A transfer of our common stock and/or preferred stock to a person who, as a result of the transfer, violates the ownership limits may not be effective under some circumstances.
Other Limitations. Other limitations could have the effect of discouraging a takeover or other transaction in which holders of some, or a majority, of our outstanding common stock might receive a premium for their shares of our common stock that exceeds the then prevailing market price or that those holders might believe to be otherwise in their best interest. The issuance of additional shares of preferred stock could have the effect of delaying or preventing a change in control of Sovranthe Company even if a change in control were in the shareholders’ interest. In addition, the Maryland General Corporation Law, or MGCL, imposes restrictions and requires specific procedures with respect to the acquisition of stated levels of share ownership and business combinations, including combinations with interested shareholders. These provisions of the MGCL could have the effect of delaying or preventing a change in control of SovranLife Storage even if a change in control were in the shareholders’ interest. Our bylaws contain a provision exempting from the MGCL control share acquisition statute any and all acquisitions by any person of shares of our stock. However, this provision may be amended or eliminated at any time. In addition, under the Operating Partnership’s agreement of limited partnership, in general, we may not merge, consolidate or engage in any combination with another person or sell all or substantially all of our assets unless that transaction includes the merger or sale of all or substantially all of the assets of the Operating Partnership, which requires the approval of the holders of 75% of the limited partnership interests thereof. If we were to own less than 75% of the limited partnership interests in the Operating Partnership, this provision of the limited partnership agreement could have the effect of delaying or preventing us from engaging in some change of control transactions.
Our Failure to Qualify as a REIT Would Have Adverse Consequences
We intend to continue to operate in a manner that will permit us to qualify as a REIT under the Code. We have not requested and do not plan to request a ruling from the Internal Revenue Service (“IRS”) that we qualify as a REIT, and the statements in this Annual Report on Form 10-K are not binding on the IRS or any court. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. Continued qualification as a REIT depends upon our continuing ability to meet various requirements concerning, among other things, the ownership of our outstanding stock, the nature of our assets, the sources of our income and the amount of our distributions to our shareholders. The fact that we hold substantially all of our assets through our Operating Partnership and its subsidiaries and joint ventures further complicates the application of the REIT requirements for us. Even a technical or inadvertent mistake could jeopardize our REIT status and, given the highly complex nature of the rules governing REITs and the ongoing importance of factual determinations, we cannot provide any assurance that we will continue to qualify as a REIT. Furthermore, Congress and the IRS might make changes to the tax laws and regulations, and the courts and the IRS might issue new rulings, that make it more difficult, or impossible, for us to remain qualified as a REIT.
If we were to fail to qualify as a REIT in any taxable year, and are unable to avail ourselves of certain
savings provisions set forth in the Code, we would not be allowed a deduction for distributions to shareholders in computing our taxable income and would be subject to federal income tax (including any applicable alternative minimum tax and possibly increased state and local taxes) on our taxable income at regular corporate rates. Unless entitled to relief under certain Code provisions, we also would be ineligible for qualification as a REIT for the four taxable years following the year during which our qualification was lost. As a result, distributions to the shareholders would be reduced for each of the years involved. Although we currently intend to continue to operate in a manner designed to qualify as a REIT, it is possible that future economic, market, legal, tax or other considerations may cause our Board of Directors to revoke our REIT election. If we fail to qualify as a REIT for federal income tax purposes and are able to avail ourselves of one or more of the statutory savings provisions in order to maintain our REIT status, we would nevertheless be required to pay penalty taxes of $50,000 or more for each such failure.
We Will Pay Some Taxes Even if We Qualify as a REIT, Reducing Cash Available for Shareholders
Even if we qualify as a REIT for federal income tax purposes, we are required to pay some federal, state and local taxes on our income and property. For example, we will be subject to income tax to the extent we distribute less than 100% of our REIT taxable income (including capital gains). Additionally, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which dividends paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. Moreover, if we have net income from “prohibited transactions,” that income will be subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business. The determination as to whether a particular sale is a prohibited transaction depends on the facts and circumstances related to that sale. While we will undertake sales of assets if those assets become inconsistent with our long-term strategic or return objectives, we do not believe that those sales should be considered prohibited transactions, but there can be no assurance that the IRS would not contend otherwise. The need to avoid prohibited transactions could cause us to forego or defer sales of properties that might otherwise be in our best interest to sell.
One of our subsidiaries has elected to be treated as a “taxable REIT subsidiary” of the Company for federal income tax purposes. A taxable REIT subsidiary is taxed as a regular corporation and is limited in its ability to deduct interest payments made to us in excess of a certain amount. In addition, if we receive or accrue certain amounts and the underlying economic arrangements among our taxable REIT subsidiary and us are not comparable to similar arrangements among unrelated parties, we will be subject to a 100% penalty tax on those payments in excess of amounts deemed reasonable between unrelated parties.
Finally, some state and local jurisdictions may tax some of our income even though as a REIT we are not subject to federal income tax on that income because not all states and localities follow the federal income tax treatment of REITs. To the extent that we are or any taxable REIT subsidiary is required to pay federal, foreign, state or local taxes, we will have less cash available for distribution to shareholders.
Complying with REIT Requirements May Limit Our Ability to Hedge Effectively and May Cause Us to Incur Tax Liabilities
The REIT provisions of the Code may limit our ability to hedge our assets and operations. Under these provisions, any income that we generate from transactions intended to hedge our interest rate risk will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if the instrument hedges interest rate risk on liabilities used to carry or acquire real estate assets or manages the risk of certain currency fluctuations, and such instrument is properly identified under applicable Treasury Regulations. Income from hedging transactions that do not meet these requirements will generally constitute non-qualifying income for purposes of both the REIT 75% and 95% gross income tests. As a result of these rules, we may have to limit our use of hedging techniques that might otherwise be advantageous or implement those hedges through a taxable REIT subsidiary. This could increase the cost of our hedging activities because our taxable REIT subsidiary would be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses in our taxable REIT subsidiary will generally not provide any tax benefit, except for being carried back or forward against past or future taxable income in the taxable REIT subsidiary.
Complying with the REIT Requirements May Cause Us to Forgo and/or Liquidate Otherwise Attractive Investments
To qualify as a REIT, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts that we distribute to our shareholders and the ownership of our shares. To meet these tests, we may be required to take or forgo taking actions that we would otherwise consider advantageous. For instance, in order to satisfy the gross income or asset tests applicable to REITs under the Code, we may be required to forgo investments that we otherwise would make. Furthermore, we may be required to liquidate from our portfolio otherwise attractive investments. In addition, we may be required to make distributions to shareholders at disadvantageous times or when we do not have funds readily available for distribution. These actions could reduce our income and amounts available for distribution to our shareholders. Thus, compliance with the REIT requirements may hinder our investment performance.
If the Operating Partnership Fails to Qualify as a Partnership for Federal Income Tax Purposes, We Could Fail to Qualify as a REIT and Suffer Other Adverse Consequences
We believe that ourthe Operating Partnership is organized and operated in a manner so as to be treated as a partnership and not an association or a publicly traded partnership taxable as a corporation, for federal income tax purposes. As a partnership, ourthe Operating Partnership is not subject to federal income tax on its income. Instead, each of the partners is allocated its share of ourthe Operating Partnership’s income. No assurance can be provided, however, that the IRS will not challenge ourthe Operating Partnership’s status as a partnership for federal income tax purposes, or that a court would not sustain such a challenge. If the IRS were successful in treating ourthe Operating Partnership as an association or publicly traded partnership taxable as a corporation for federal income tax purposes, we would fail to meet the gross income tests and certain of the asset tests applicable to REITs and, accordingly, would cease to qualify as a REIT. Also, the failure of the Operating Partnership to qualify as a partnership would cause it to become subject to federal corporate income tax, which would reduce significantly the amount of its cash available for distribution to its partners, including us.
U.S. federal income tax treatment of REITs and investments in REITs may change, which may result in the loss of our tax benefits of operating as a REIT.
Current U.S. federal income tax treatment of a REIT and an investment in a REIT may be modified by legislative, judicial or administrative action at any time. The administration of President Trump and the leaders of the House of Representatives and the Senate have expressed interest in passing comprehensive tax reform this year. The descriptions of tax reform proposals have not specifically addressed the treatment of REITs, amendments to U.S. federal income tax laws and interpretations of these laws could adversely affect us and the tax consequences of an investment in our common shares.
Some of the tax benefits identified as possibly being eliminated or reduced include benefits that have been important to the real estate industry, including REITs, such as eliminating the like-kind exchange rules or the deduction of net interest expense. In addition, tax reform proposals contemplate reductions in corporate tax rates. Substantially reduced corporate tax rates could possibly reduce or eliminate the relative attractiveness of REITs as an entity for owning real estate.
We cannot predict how changes in U.S. federal income tax law will affect us or our investors nor can we predict the long-term impact of proposed tax reforms on the real estate industry.
We May Change the Dividend Policy for Our Common Stock in the Future
In 2014,2016, our Board of Directors authorized and we declared quarterly common stock dividends of $0.68$0.85 per share in January, and $0.95 per share for April, July and October, the equivalent of anfor a total 2016 dividend per share annual rate of $2.72$3.70 per share. In addition, our board of directors authorized and we declared an increaseda quarterly common stock dividend of $0.75$0.95 per share in January 2015.2017. We can provide no assurance that our board will not reduce or eliminate entirely dividend distributions on our common stock in the future.
Our Board of Directors will continue to evaluate our distribution policy on a quarterly basis as they monitor the capital markets and the impact of the economy on our operations. The decisions to authorize and pay dividends on our common stock in the future, as well as the timing, amount and composition of any such future dividends, will be at the sole discretion of our boardBoard of directorsDirectors in light of conditions then existing, including our earnings, financial condition, capital requirements, debt maturities, the availability of capital, applicable REIT and legal restrictions and the general overall economic conditions and other factors. Any change in our dividend policy could have a material adverse effect on the market price of our common stock.
Market Interest Rates May Influence the Price of Our Common Stock
One of the factors that may influence the price of our common stock in public trading markets or in private transactions is the annual yield on our common stock as compared to yields on other financial instruments. An increase in market interest rates will result in higher yields on other financial instruments, which could adversely affect the price of our common stock.
Regional Concentration of Our Business May Subject Us to Economic Downturns in the States of Texas and Florida
As of December 31, 2014, 2052016, 244 of our 518659 self-storage facilities are located in the states of Texas and Florida. For the year ended December 31, 2014,2016, these facilities accounted for approximately 39%38% of store revenues. This concentration of business in Texas and Florida exposes us to potential losses resulting from a downturn in the economies of those states. If economic conditions in those states deteriorate, we may experience a reduction in existing and new business, which may have an adverse effect on our business, financial condition and results of operations.
When We Acquire Properties in New Markets, We Will Be Subject to Increased Operational Risks
We may acquire self-storage properties in markets where we have little or no operational experience. For example, in 2016 we acquired 22 self-storage properties in California, 17 self-storage properties in Nevada, one self-storage property in Utah, and one self-storage property in Wisconsin, all of which are states where we had not previously operated. When we enter into new markets, we will be subject to increased risks resulting from our lack of experience and infrastructure in these markets and may need to incur additional costs, both expected and unexpected, in order to develop our operating capabilities in these markets. These risks could materially and adversely affect us, including our growth prospects, financial condition and results of operations.
Changes in Taxation of Corporate Dividends May Adversely Affect the Value of Our Common Stock
The maximum marginal rate of tax payable by domestic noncorporate taxpayers on dividends received from a regular “C” corporation under current federal law generally is 20%, as opposed to higher ordinary income rates. The reduced tax rate, however, does not apply to distributions paid to domestic noncorporate taxpayers by a REIT on its stock, except for certain limited amounts. The earnings of a REIT that are distributed to its stockholders generally remain subject to less federal income taxation than earnings of a non-REIT “C” corporation that are distributed to its stockholders net of corporate-level income tax. However, the lower rate of taxation to dividends paid by regular “C” corporations could cause domestic noncorporate investors to view the stock of regular “C” corporations as more attractive relative to the stock of a REIT, because the dividends from regular “C” corporations continue to be taxed at a lower rate while distributions from REITs (other than distributions designated as capital gain dividends) are generally taxed at the same rate as other ordinary income for domestic noncorporate taxpayers.
We are heavily dependent on computer systems, telecommunications and the Internet to process transactions, summarize results and manage our business. Security breaches or a failure of such networks, systems or technology could adversely impact our business and customer relationships.
We are heavily dependent upon automated information technology and Internet commerce, with many of our new customers coming from the Internet or the telephone, and the nature of our business involves the receipt and retention of personal information about them. We centrally manage significant components of our operations with our computer systems, including our financial information, and we also rely extensively on third-party vendors to retain data, process transactions and provide other systems services. These systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer worms, viruses and other destructive or disruptive security breaches and catastrophic events.
As a result, our operations could be severely impacted by a natural disaster, terrorist attack or other circumstance that resulted in a significant outage of our systems or those of our third party providers, despite our use of back up and redundancy measures. Further, viruses and other related risks could negatively impact our information technology processes. We could also be subject to a “cyber-attack” or other data security breach which would penetrate our network security, resulting in misappropriation of our confidential information, including customer personal information. System disruptions and shutdowns could also result in additional costs to repair or replace such networks or information systems and possible legal liability, including government enforcement actions
and private litigation. In addition, our customers could lose confidence in our ability to protect their personal information, which could cause them to move out of rented storage spaces. Such events could lead to lost future sales and adversely affect our results of operations.
Item 1B. | Unresolved Staff Comments |
None.
Item 2. | Properties |
At December 31, 2014,2016, we held ownership interests in, leased, and/or managed a total of 518659 Properties situated in twenty-fivetwenty-nine states. Among our 518659 self-storage properties are 39 properties that we manage for an unconsolidated joint venture of which we are a 20% owner, 30 properties that we manage for an unconsolidated joint venture of which we are a 15% owner, 17and 26 properties that we manage and in which have no ownership interest, andinterest. We are also a 20% owner in an unconsolidated joint venture (191 III Life Storage Holdings LLC) which acquired four properties in January 2017 that as of December 31, 2014, we leased.have managed since acquisition.
Our self-storage facilities offer inexpensive, easily accessible, enclosed storage space to residential and commercial users on a month-to-month basis. Most of our Properties are fenced and well lighted with automated access systems and surveillance cameras. A majority of the Properties are single-story, thereby providing customers with the convenience of direct vehicle access to their storage spaces. Our stores range in size from 18,000 to 181,000195,000 net rentable square feet, with an average of approximately 69,00070,000 net rentable square feet. The Properties generally are constructed of masonry or steel walls resting on concrete slabs and have standing seam metal, shingle, or tar and gravel roofs. All Properties have a property manager on-site during business hours. Generally, customers have access to their storage space up to 15 hours a day, and some customers are provided 24-hour access. Individual storage spaces are secured by a lock furnished by the customer to provide the customer with control of access to the space.
All of the Properties conduct business under the user-friendlycustomer-friendly names Life Storage® or Uncle Bob’s Self Storage®. At December 31, 2016, there remain stores in certain markets that continue to operate under the name Uncle Bob’s Self-Storage ®.Self Storage® and will continue to do so until our full transition to the Life Storage® name is complete in the first half of 2017.
The following table provides certain information regarding the Properties in which we have an ownership interest, lease, and/or manage as of December 31, 2014:2016:
Number of Stores at December 31, 2014 | Square Feet | Number of Spaces | Percentage of Store Revenue | Number of Stores at December 31, 2016 | Square Feet | Number of Spaces | Percentage of Store Revenue | |||||||||||||||||||||||||
Alabama | 22 | 1,616,958 | 12,175 | 3.4 | % | 21 | 1,581,803 | 12,152 | 2.7 | % | ||||||||||||||||||||||
Arizona | 10 | 668,582 | 5,870 | 1.6 | % | 12 | 798,474 | 7,077 | 1.6 | % | ||||||||||||||||||||||
California | 22 | 2,040,278 | 17,981 | 3.7 | % | |||||||||||||||||||||||||||
Colorado | 5 | 330,246 | 2,781 | 1.2 | % | 11 | 776,794 | 6,826 | 1.6 | % | ||||||||||||||||||||||
Connecticut | 8 | 640,025 | 6,415 | 2.9 | % | 10 | 754,348 | 7,539 | 2.4 | % | ||||||||||||||||||||||
Florida | 72 | 4,940,025 | 48,038 | 14.3 | % | 87 | 5,933,877 | 57,474 | 13.7 | % | ||||||||||||||||||||||
Georgia | 30 | 2,128,323 | 18,063 | 5.5 | % | 30 | 2,091,516 | 17,870 | 4.5 | % | ||||||||||||||||||||||
Illinois | 13 | 954,448 | 9,162 | 2.6 | % | 45 | 3,352,221 | 33,972 | 6.1 | % | ||||||||||||||||||||||
Kentucky | 2 | 142,914 | 1,321 | 0.4 | % | 2 | 142,914 | 1,322 | 0.3 | % | ||||||||||||||||||||||
Louisiana | 17 | 1,053,939 | 8,808 | 2.6 | % | 16 | 974,384 | 8,296 | 2.0 | % | ||||||||||||||||||||||
Maine | 4 | 220,241 | 2,204 | 0.8 | % | 4 | 219,967 | 2,179 | 0.7 | % | ||||||||||||||||||||||
Maryland | 3 | 138,729 | 1,618 | 0.6 | % | 3 | 138,639 | 1,618 | 0.4 | % | ||||||||||||||||||||||
Massachusetts | 13 | 693,754 | 6,655 | 2.6 | % | 15 | 824,090 | 8,296 | 2.3 | % | ||||||||||||||||||||||
Mississippi | 15 | 1,154,222 | 8,805 | 2.6 | % | 12 | 883,656 | 6,606 | 1.6 | % | ||||||||||||||||||||||
Missouri | 15 | 928,165 | 8,271 | 2.3 | % | 14 | 912,735 | 8,206 | 2.1 | % | ||||||||||||||||||||||
Nevada | 17 | 1,303,192 | 11,169 | 1.3 | % | |||||||||||||||||||||||||||
New Hampshire | 4 | 260,236 | 2,342 | 0.8 | % | 10 | 725,777 | 6,226 | 1.5 | % | ||||||||||||||||||||||
New Jersey | 29 | 2,093,768 | 21,963 | 7.6 | % | 29 | 2,089,217 | 21,867 | 6.6 | % | ||||||||||||||||||||||
New York | 35 | 2,144,105 | 20,708 | 8.4 | % | 44 | 2,651,089 | 25,451 | 7.4 | % | ||||||||||||||||||||||
North Carolina | 20 | 1,226,815 | 11,179 | 3.2 | % | 21 | 1,272,271 | 11,572 | 2.5 | % | ||||||||||||||||||||||
Ohio | 23 | 1,575,216 | 13,124 | 4.0 | % | 24 | 1,630,497 | 13,691 | 3.0 | % | ||||||||||||||||||||||
Pennsylvania | 9 | 606,776 | 5,164 | 1.5 | % | 11 | 692,196 | 5,984 | 1.5 | % | ||||||||||||||||||||||
Rhode Island | 4 | 206,121 | 1,924 | 0.7 | % | 4 | 206,721 | 1,924 | 0.6 | % | ||||||||||||||||||||||
South Carolina | 8 | 448,268 | 3,926 | 1.2 | % | 13 | 853,791 | 7,533 | 1.9 | % | ||||||||||||||||||||||
Tennessee | 5 | 348,504 | 2,999 | 0.8 | % | 5 | 348,504 | 3,005 | 0.8 | % | ||||||||||||||||||||||
Texas | 133 | 9,691,740 | 80,210 | 25.1 | % | 157 | 11,495,842 | 95,000 | 24.7 | % | ||||||||||||||||||||||
Utah | 1 | 86,000 | 575 | 0.1 | % | |||||||||||||||||||||||||||
Virginia | 19 | 1,296,341 | 12,065 | 3.3 | % | 17 | 1,265,058 | 11,535 | 2.3 | % | ||||||||||||||||||||||
Wisconsin | 2 | 121,442 | 1,138 | 0.1 | % | |||||||||||||||||||||||||||
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Total | 518 | 35,508,461 | 315,790 | 100.0 | % | 659 | 46,167,293 | 414,084 | 100.0 | % | ||||||||||||||||||||||
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At December 31, 2014,2016, the Properties had an average occupancy of 88.5%87.76% and an annualized rent per occupied square foot of $12.40.
Item 3. | Legal Proceedings |
On or about August 25, 2014, a putative class action was filed against the Company in the Superior Court of New Jersey Law Division Burlington County. The action seeks to obtain declaratory, injunctive and monetary relief for a class of consumers based upon alleged violations by the Company of the New Jersey Truth in Customer Contract, Warranty and Notice Act, the New Jersey Consumer Fraud Act and the New Jersey Insurance Producer Licensing Act. On October 17, 2014, the action was removed from the Superior Court of New Jersey Law Division Burlington County to the United States District Court for the District of New Jersey. The Company brought a motion to partially dismiss the complaint for failure to state a claim, and on July 16, 2015, the Company’s motion was granted in part and denied in part. On October 20, 2016, the complaint was amended to add a claim that the Company’s insurance program violates New Jersey consumer protection laws. The Company intends to vigorously defend the action, and the possibility of any adverse outcome cannot be determined at this time.
Item 4. | Mine Safety Disclosures |
Not Applicable
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Our Common Stock iswas traded on the New York Stock Exchange under the symbol “SSS.”“SSS” until August 15, 2016 at which time our symbol was change “LSI”. Set forth below are the high and low sales prices for our Common Stock for each full quarterly period within the two most recent fiscal years.
Quarter 2013 | High | Low | ||||||||||||||
Quarter 2015 | High | Low | ||||||||||||||
1st | $ | 67.44 | $ | 60.29 | $ | 97.76 | $ | 87.40 | ||||||||
2nd | 71.55 | 62.11 | 94.84 | 85.95 | ||||||||||||
3rd | 76.53 | 64.69 | 99.32 | 85.69 | ||||||||||||
4th | 80.24 | 63.07 | 110.60 | 93.33 | ||||||||||||
Quarter 2014 | High | Low | ||||||||||||||
Quarter 2016 | High | Low | ||||||||||||||
1st | $ | 76.45 | $ | 62.66 | $ | 118.18 | $ | 98.80 | ||||||||
2nd | 79.29 | 72.88 | $ | 117.81 | $ | 98.93 | ||||||||||
3rd | 79.93 | 73.59 | $ | 107.71 | $ | 86.45 | ||||||||||
4th | 89.57 | 74.10 | $ | 88.89 | $ | 77.00 |
As of February 13, 2015,2017, there were approximately 752662 holders of record of our Common Stock. These figures do not include common shares held by brokers and other institutions on behalf of shareholders.
We have paid quarterly dividends to our shareholders since our inception. Reflected in the table below are the dividends paid in the last two years.
For federal income tax purposes, distributions to shareholders are treated as ordinary income, capital gain, return of capital or a combination thereof. Distributions to shareholders for 20142016 represent 100%95% ordinary income.income and 5% return of capital.
History of Dividends Declared on Common Stock
| ||||
January | $ | 0.750 per share | ||
April | $ | 0.750 per share | ||
July | $ | 0.850 per share | ||
October | $ | 0.850 per share | ||
January | $ | 0.850 per share | ||
April | $ | 0.950 per share | ||
July | $ | 0.950 per share | ||
October | $ | 0.950 per share |
For each quarter in 2015 and 2016, the Operating Partnership paid a cash distribution per unit in an amount equal to the dividend paid on a share of common stock for such quarter.
In 2016, the Operating Partnership issued 90,477 OP Units with a fair value of $9.5 million to pay part of the consideration to acquire certain self-storage properties. The issuance of OP Units in connection with these acquisitions were exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, because it did not involve any public offering.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information as of December 31, 2014,2016, with respect to equity compensation plans under which shares of the Company’s Common Stock may be issued.
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (#) | Weighted average exercise price of outstanding options, warrants and rights ($) | Number of securities remaining available for future issuance (#) | Number of securities to be issued upon exercise of outstanding options, warrants and rights (#) | Weighted average exercise price of outstanding options, warrants and rights ($) | Number of securities remaining available for future issuance (#) | ||||||||||||||||||
Equity compensation plans approved by shareholders: | ||||||||||||||||||||||||
2005 Award and Option Plan | 82,606 | $ | 45.75 | 543,229 | 77,206 | $ | 45.49 | — | ||||||||||||||||
2015 Award and Option Plan (2) | 79,620 | $ | — | 435,570 | ||||||||||||||||||||
2009 Outside Directors’ Stock Option and Award Plan | 29,000 | $ | 56.31 | 84,855 | 18,500 | $ | 79.58 | 71,016 | ||||||||||||||||
1995 Outside Directors’ Stock Option Plan | 4,000 | $ | 49.65 | 0 | ||||||||||||||||||||
Deferred Compensation Plan for Directors (1) | 45,505 | N/A | 2,050 | 20,513 | N/A | 23,625 | ||||||||||||||||||
Equity compensation plans not approved by shareholders: | N/A | N/A | N/A | N/A | N/A | N/A |
(1) | Under the Deferred Compensation Plan for Directors, non-employee Directors may defer all or part of their Directors’ fees that are otherwise payable in cash. Directors’ fees that are deferred under the Plan will be credited to each Directors’ account under the Plan in the form of Units. The number of Units credited is determined by dividing the amount of Directors’ fees deferred by the closing price of the Company’s Common Stock on the New York Stock Exchange on the day immediately preceding the day upon which Directors’ fees otherwise would be paid by the Company. A Director is credited with additional Units for dividends on the shares of Common Stock represented by Units in such Directors’ Account. A Director may elect to receive the shares in a lump sum on a date specified by the Director or in quarterly or annual installments over a specified period and commencing on a specified date. |
Unregistered Sale of Securities
(2) | Includes the maximum number of shares (79,620) that could be issued as part of 2015 and 2016 performance-based awards. The actual number of shares to be issued will be determined at the end of the three year performance periods in 2018 and 2019. See note 9 of our consolidated financial statements. |
During the quarterly period ended December 31, 2014, the Company issued 2,000 shares of common stock as a result of the exercise of stock options issued under the Company’s 2009 Outside Directors’ Stock Option and Award Plan. The Company received aggregate proceeds of $139,800 in connection with the exercise of the stock options. The issuance of such common stock was exempt from registration pursuant to the Securities Act of 1933, among other reasons, by virtue of Section 4(2) as transactions not involving a public offering.
CORPORATE PERFORMANCE GRAPH
The following chart and line-graph presentation compares (i) the Company’s shareholder return on an indexed basis since December 31, 20092011 with (ii) the S&P Stock Index and (iii) the National Association of Real Estate Investment Trusts Equity Index.
CUMULATIVE TOTAL SHAREHOLDER RETURN
SOVRAN SELFLIFE STORAGE, INC.
DECEMBER 31, 20092011 - DECEMBER 31, 20142016
Dec. 31, 2009 | Dec. 31, 2010 | Dec. 31, 2011 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2011 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||
S&P | 100.00 | 115.06 | 117.49 | 136.30 | 180.44 | 205.14 | 100.00 | 116.00 | 153.57 | 174.60 | 177.01 | 198.18 | ||||||||||||||||||||||||||||||||||||
NAREIT | 100.00 | 127.96 | 138.57 | 163.60 | 167.63 | 218.16 | 100.00 | 118.06 | 120.97 | 157.43 | 162.46 | 176.30 | ||||||||||||||||||||||||||||||||||||
SSS | 100.00 | 108.34 | 131.52 | 197.92 | 214.01 | 231.41 | ||||||||||||||||||||||||||||||||||||||||||
LSI | 100.00 | 150.49 | 162.72 | 226.02 | 287.95 | 237.27 |
The foregoing item assumes $100.00 invested on December 31, 2009,2011, with dividends reinvested.
Item 6. | Selected Financial Data |
LIFE STORAGE, INC.
The following table sets forth selected financial and operating data on an historical consolidated basis for the Parent Company. The selected historical financial data as of and for the five-year period ended December 31, 2016 are derived from the Parent Company’s consolidated financial statements, which have been audited by Ernst & Young LLP, an independent registered public accounting firm. The consolidated financial statements as of December 31, 2016 and 2015, and for each of the years in the three-year period ended December 31, 2016, and their report thereon, are included herein. The other data presented below is not derived from the financial statements.
The following selected financial and operating information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the consolidated financial statements and related notes thereto of the Parent Company included elsewhere in this Annual Report on Form 10-K:
At or For Year Ended December 31, | At or For Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||
(dollars in thousands, except per share data) | 2014 | 2013 | 2012 | 2011 | 2010 | 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||||||||
Operating Data | ||||||||||||||||||||||||||||||||||||||||
Operating revenues | $ | 326,080 | $ | 273,507 | $ | 234,082 | $ | 200,860 | $ | 181,874 | $ | 462,608 | $ | 366,602 | $ | 326,080 | $ | 273,507 | $ | 234,082 | ||||||||||||||||||||
Income from continuing operations | 89,057 | 71,472 | 48,121 | 27,314 | 30,819 | 84,956 | 113,077 | 89,057 | 71,472 | 48,121 | ||||||||||||||||||||||||||||||
Income from discontinued operations (1) | — | 3,123 | 7,520 | 4,215 | 11,722 | — | — | — | 3,123 | 7,520 | ||||||||||||||||||||||||||||||
Net income | 89,057 | 74,595 | 55,641 | 31,529 | 42,541 | 84,956 | 113,077 | 89,057 | 74,595 | 55,641 | ||||||||||||||||||||||||||||||
Net income attributable to common shareholders | 88,531 | 74,126 | 55,128 | 30,592 | 40,642 | 85,225 | 112,524 | 88,531 | 74,126 | 55,128 | ||||||||||||||||||||||||||||||
Income from continuing operations per common share attributable to common shareholders– diluted | 2.67 | 2.26 | 1.61 | 0.95 | 1.05 | |||||||||||||||||||||||||||||||||||
Income from continuing operations per common share attributable to common shareholders – diluted | 1.96 | 3.16 | 2.67 | 2.26 | 1.61 | |||||||||||||||||||||||||||||||||||
Net income per common share attributable to common shareholders – basic | 2.68 | 2.37 | 1.88 | 1.11 | 1.48 | 1.97 | 3.18 | 2.68 | 2.37 | 1.88 | ||||||||||||||||||||||||||||||
Net income per common share attributable to common shareholders – diluted | 2.67 | 2.36 | 1.87 | 1.10 | 1.48 | 1.96 | 3.16 | 2.67 | 2.36 | 1.87 | ||||||||||||||||||||||||||||||
Dividends declared per common share (2) | 2.72 | 2.02 | 1.80 | 1.80 | 1.80 | 3.70 | 3.20 | 2.72 | 2.02 | 1.80 | ||||||||||||||||||||||||||||||
Balance Sheet Data | ||||||||||||||||||||||||||||||||||||||||
Investment in storage facilities at cost | $ | 2,177,983 | $ | 1,864,637 | $ | 1,742,354 | $ | 1,525,283 | $ | 1,349,927 | $ | 4,243,308 | $ | 2,491,702 | $ | 2,177,983 | $ | 1,864,637 | $ | 1,742,354 | ||||||||||||||||||||
Total assets | 1,854,800 | 1,561,875 | 1,484,310 | 1,343,544 | 1,184,369 | 3,857,984 | 2,118,822 | 1,850,727 | 1,558,894 | 1,480,880 | ||||||||||||||||||||||||||||||
Total debt | 801,127 | 626,254 | 684,251 | 625,423 | 488,954 | 1,653,552 | 827,643 | 797,054 | 623,273 | 680,821 | ||||||||||||||||||||||||||||||
Total liabilities | 865,309 | 678,226 | 742,910 | 673,539 | 527,226 | 1,751,399 | 898,336 | 861,236 | 675,245 | 739,480 | ||||||||||||||||||||||||||||||
Other Data | ||||||||||||||||||||||||||||||||||||||||
Net cash provided by operating activities | $ | 146,068 | $ | 120,646 | $ | 98,762 | $ | 79,897 | $ | 73,671 | $ | 225,550 | $ | 186,198 | $ | 146,068 | $ | 120,646 | $ | 98,762 | ||||||||||||||||||||
Net cash used in investing activities | (334,993 | ) | (114,345 | ) | (175,664 | ) | (189,879 | ) | (32,605 | ) | (1,796,069 | ) | (328,689 | ) | (334,993 | ) | (114,345 | ) | (175,664 | ) | ||||||||||||||||||||
Net cash (used in) provided by financing activities | 187,944 | 4,032 | 76,836 | 111,537 | (46,010 | ) | ||||||||||||||||||||||||||||||||||
Net cash provided by (used in) financing activities | 1,587,184 | 140,968 | 187,944 | (4,032 | ) | 76,836 |
(1) | In 2013 we sold four stores and in 2012 we sold seventeen |
(2) | In |
LIFE STORAGE LP
The following table sets forth selected financial and operating data on an historical consolidated basis for the Operating Partnership. The selected historical financial data as of and for the five-year period ended December 31, 2016 are derived from the Operating Partnership’s consolidated financial statements. The consolidated financial statements for the years ending December 31, 2013 through December 31, 2016 have been audited by Ernst & Young LLP, an independent registered public accounting firm. The consolidated financial statements as of December 31, 2016 and 2015, and for each of the years in the three-year period ended December 31, 2016, and their report thereon, are included herein. The other data presented below is not derived from the financial statements.
The following selected financial and operating information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the consolidated financial statements and related notes thereto of the Operating Partnership included elsewhere in this Annual Report on Form 10-K:
At or For Year Ended December 31, | ||||||||||||||||||||
(dollars in thousands, except per unit data) | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
Operating Data | ||||||||||||||||||||
Operating revenues | $ | 462,608 | $ | 366,602 | $ | 326,080 | $ | 273,507 | $ | 234,082 | ||||||||||
Income from continuing operations | 84,956 | 113,077 | 89,057 | 71,472 | 48,121 | |||||||||||||||
Income from discontinued operations (1) | — | — | — | 3,123 | 7,520 | |||||||||||||||
Net income | 84,956 | 113,077 | 89,057 | 74,595 | 55,641 | |||||||||||||||
Net income attributable to common unitholders | 85,225 | 112,524 | 88,531 | 74,126 | 55,128 | |||||||||||||||
Income from continuing operations per common unit attributable to common unitholders – diluted | 1.96 | 3.16 | 2.67 | 2.26 | 1.61 | |||||||||||||||
Net income per common unit attributable to common unitholders – basic | 1.97 | 3.18 | 2.68 | 2.37 | 1.88 | |||||||||||||||
Net income per common unit attributable to common unitholders – diluted | 1.96 | 3.16 | 2.67 | 2.36 | 1.87 | |||||||||||||||
Distributions declared per common unit (2) | 3.70 | 3.20 | 2.72 | 2.02 | 1.80 | |||||||||||||||
Balance Sheet Data | ||||||||||||||||||||
Investment in storage facilities at cost | $ | 4,243,308 | $ | 2,491,702 | $ | 2,177,983 | $ | 1,864,637 | $ | 1,742,354 | ||||||||||
Total assets | 3,857,984 | 2,118,822 | 1,850,727 | 1,558,894 | 1,480,880 | |||||||||||||||
Total debt | 1,653,552 | 827,643 | 797,054 | 623,273 | 680,821 | |||||||||||||||
Total liabilities | 1,751,399 | 898,336 | 861,236 | 675,245 | 739,480 | |||||||||||||||
Other Data | ||||||||||||||||||||
Net cash provided by operating activities | $ | 225,550 | $ | 186,198 | $ | 146,068 | $ | 120,646 | $ | 98,762 | ||||||||||
Net cash used in investing activities | (1,796,069 | ) | (328,689 | ) | (334,993 | ) | (114,345 | ) | (175,664 | ) | ||||||||||
Net cash provided by (used in) financing activities | 1,587,184 | 140,968 | 187,944 | (4,032 | ) | 76,836 |
(1) | In 2013 we sold four stores and in 2012 we sold seventeen stores whose results of operations and gain (loss) on disposal are classified as discontinued operations for all previous years presented. |
(2) | In 2012 we declared regular quarterly distributions of $0.45 in January, April, July and October. In 2013 we declared regular quarterly distributions of $0.48 in January and April, and $0.53 in July and October. In 2014 we declared regular quarterly distributions of $0.68 in January, April, July and October. In 2015 we declared regular quarterly distributions of $0.75 in January and April, and $0.85 in July and October. In 2016 we declared regular quarterly distributions of $0.85 in January and $0.95 in April, July and October. |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with the financial statements and notes thereto included elsewhere in this report.
Disclosure Regarding Forward-Looking Statements
When used in this discussion and elsewhere in this document, the words “intends,” “believes,” “expects,” “anticipates,” and similar expressions are intended to identify “forward-looking statements” within the meaning of that term in Section 27A of the Securities Act of 1933 and in Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the effect of competition from new self-storage facilities, which would cause rents and occupancy rates to decline; the Company’s ability to evaluate, finance and integrate acquired businesses into the Company’s existing business and operations; the Company’s ability to effectively compete in the industry in which it does business; the Company’s existing indebtedness may mature in an unfavorable credit environment, preventing refinancing or forcing refinancing of the indebtedness on terms that are not as favorable as the existing terms; interest rates may fluctuate, impacting costs associated with the Company’s outstanding floating rate debt; the Company’s ability to comply with debt covenants; any future ratings on the Company’s debt instruments; the regional concentration of the Company’s business may subject it to economic downturns in the states of Florida and Texas; the Company’s reliance on its call center; the Company’s cash flow may be insufficient to meet required payments of operating expenses, principal, interest and dividends; and tax law changes that may change the taxability of future income.
Business and Overview
We believe we are the fifth largest operator of self-storage properties in the United States based on square feet owned and managed. All of our stores are operatedconduct business under the user-friendlycustomer-friendly names Life Storage® or Uncle Bob’s Self Storage®. At December 31, 2016, there remain stores in certain markets that continue to operate under the name “UncleUncle Bob’s Self-Storage”Self Storage®. and will continue to do so until our full transition to the Life Storage® name is complete in the first half of 2017.
Operating Strategy
Our operating strategy is designed to generate growth and enhance value by:
A. | Increasing operating performance and cash flow through aggressive management of our stores: |
Our customized computer applications link each of our primary sales channels (customer care center, web, and store) allowing for real time access to space type and inventory, pricing, promotions, and
other pertinent store information. This also provides us with raw data on historical and current pricing, move-in and move-out activity, specials and occupancies, etc. This data is then used within the advanced pricing analytics programs employed by our revenue management team.
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B. | Acquiring additional stores: |
C. | Expanding our management business: |
D. | Expanding and enhancing our existing stores: |
Supply and Demand / Operating Trends
We believe the supply and demand model in the self-storage industry is micro market specific in that a majority of our business comes from within a five mile radius of our stores. The recent economic conditions and the credit market environment havehad resulted in a decrease in new supply on a national basis infrom 2010-2015, but the last five years. With the recent looseningout-performance of the debt and equity markets, wesector compared to other real estate asset classes has drawn new capital to self-storage. The Company expects a modest, but noticeable, growth in new supply at least through 2018. We have seen capitalization rates on quality acquisitions in the top fifty major metropolitan markets (expected annual return on investment) decrease fromremain stable at approximately 5.75%4.50% to 5.00%5.50%.
We believe our industry weathered the most recent recession very well. Although our industry experienced softness in 2008 through 2011, our same store sales showed positive increases save for 2009, when we showed a 3.1% decrease in same store revenue. That was the first time in recent history that we recorded negative same store sales. We feel our recent performance further supports the notion that the self-storage industry holds up well through recessions.
We believe our same-store move-ins in 20142016 were lower than 20132015 due to the fact that our stores werehad higher occupiedoccupancy in 2014,2016, resulting in less space to rent. We believe the reduction in same store move outsmove-outs is a result of customers renting with us for longer staying customers.periods.
2014 | 2013 | Change | ||||||||||
Same store move ins | 159,274 | 166,116 | (6,842 | ) | ||||||||
Same store move outs | 155,914 | 158,305 | (2,391 | ) | ||||||||
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Difference | 3,360 | 7,811 | (4,451 | ) |
We expect conditions in most of our markets to continue the recovery that we saw in 2011 through 2014.
2016 | 2015 | Change | ||||||||||
Same store move ins | 162,268 | 166,843 | (4,575 | ) | ||||||||
Same store move outs | 159,841 | 162,948 | (3,107 | ) | ||||||||
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Difference | 2,427 | 3,895 | (1,468 | ) |
We were able to maintain relatively flat expenses at the store operating level from 2009 through 2012, but did see above average increases in property taxes and insurance in 2013, and above average increases in property taxes in 2014.2014 through 2016. We do expect same store expense growth to see pressureresulting from increases in wages, health costs, property insurance and property tax increases in 2015.2017. We believe the same store expense increases will be at manageable levels.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts reported in our financial statements and the accompanying notes. On an on-going basis, we evaluate our estimates and judgments, including those related to carrying values of storage facilities, bad debts, and contingencies and litigation. We base these estimates on experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Assigning purchase price to assets acquired: The purchase price of acquired storage facilities is assigned primarily to land, land improvements, building, equipment, and in-place customer leases based on the fair values of these assets as of the date of acquisition. We use significant unobservable inputs in our determination of the fair values of these assets. The determination of these inputs involves judgments and estimates that can vary for each individual property based on a number of factors specific to the properties and the functional, economic and other factors affecting each property. To determine the fair value of land, we use prices per acre derived from observed transactions involving comparable land in similar locations. To determine the fair value of buildings, equipment and improvements, we use financial projections and applicable discount rates to estimate the fair values of properties acquired, as well as current replacement cost estimates based on information derived from construction industry data by geographic region as adjusted for the age, condition, and economic obsolescence associated with these assets. The fair values of in-place customer leases is based on the rent that would be lost due to the amount of time required to replace existing customers which is based on our historical experience with market demand and turnover in our facilities.
Carrying value of storage facilities: We believe our judgment regarding the impairment of the carrying value of our storage facilities is a critical accounting policy. Our policy is to assess the carrying value of our storage facilities for impairment whenever events or circumstances indicate that the carrying value of a storage facility may not be recoverable. Such events or circumstances would include negative operating cash flow, significant declining revenue per storage facility, significant damage sustained from accidents or natural disasters, or an expectation that, more likely than not, a property will be sold or otherwise disposed of significantly before the end of its previously
estimated useful life. ImpairmentWhen indicators of impairment exist, impairment is evaluated based upon comparing the sum of the expected undiscounted future cash flows to the carrying value of the storage facility, on a property by property basis. If the sum of the undiscounted cash flowflows is less than the carrying amount,value of the storage facility, an impairment loss is recognized for the amount by which the carrying amount exceeds the fair value of the asset group. If cash flow projections are inaccurate and in the future it is determined that storage facility carrying values
are not recoverable, impairment charges may be required at that time and could materially affect our operating results and financial position. Estimates of undiscounted cash flows could change based upon changes in market conditions, expected occupancy rates, etc. No assets had been determined to be impaired under this policy in 2014.2016.
Estimated useful lives of long-lived assets: We believe that the estimated lives used for our depreciable, long-lived assets is a critical accounting policy. We periodically evaluate the estimated useful lives of our long-lived assets to determine if any changes are warranted based upon various factors, including changes in the planned usage of the assets, customer demand, etc. Changes in estimated useful lives of these assets could have a material adverse impact on our financial condition or results of operations. In 2016, the Company changed the useful lives of existing Uncle Bob’s Self Storage® signs as a result of the change in the name of the Company’s storage facilities from Uncle Bob’s Self Storage® to Life Storage® (See Note 1 to the financial statements) which required replacement of the existing signage. These changes resulted in an increase in depreciation expense of approximately $8.2 million in 2016 as depreciation was accelerated over the new useful lives. The Company estimates that this change will result in an additional increase in depreciation expense of approximately $1 million in 2017 as a result of the replacement of this existing Uncle Bob’s Self Storage® signage. Upon completion of the change, the carrying value of the Uncle Bob’s Self Storage® signage will be zero. We have not made any other significant changes to the estimated useful lives of our long-lived assets in the past and we do not have any current expectation of making significant changes in 2015.2017.
Consolidation and investment in joint ventures: We consolidate all wholly owned subsidiaries. Partially owned subsidiaries and joint ventures are consolidated when we control the entity or have the power to direct the activities most significant to the economic performance of the entity. Investments in joint ventures that we do not control but over which we have significant influence are reported using the equity method. Under the equity method, our investment in joint ventures are stated at cost and adjusted for our share of net earnings or losses and reduced by distributions. Equity in earnings of real estate ventures is generally recognized based on our ownership interest in the earnings of each of the unconsolidated real estate ventures.
Revenue and Expense Recognition: Rental income is recognized when earned pursuant to month-to-month leases for storage space. Promotional discounts are recognized as a reduction to rental income over the promotional period, which is generally during the first month of occupancy. Rental income received prior to the start of the rental period is included in deferred revenue.
Qualification as a REIT: We operate, and intend to continue to operate, as a REIT under the Code, but no assurance can be given that we will at all times so qualify. To the extent that we continue to qualify as a REIT, we will not be taxed, with certain limited exceptions, on the taxable income that is distributed to our shareholders. If we fail to qualify as a REIT, any requirement to pay federal income taxes could have a material adverse impact on our financial condition and results of operations.
Recent Accounting Pronouncements
In July 2013, the FASB issued ASU 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” This ASU provides explicit guidance regarding the presentation in the statement of financial position of an unrecognized tax benefit when net operating losses or tax credit carryforwards exist. It is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, with early adoption permitted, and is applicableSee Note 2 to the Company’s fiscal year beginning January 1, 2014. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In April 2014, the FASB issued ASU 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and disclosures of Components of an Entity”. Under this ASU, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results. The ASU also requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. It is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014, with early adoption permitted. The Company adopted this guidance effective January 1, 2014 and the adoption is expected to significantly reduce the classification of property sales by the Company as discontinued operations.
In May 2014, FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires an entity to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company has the option to apply the provisions of ASU 2014-09 either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the new guidance recognized at the date of initial application. The Company has not yet completed its assessment of the impact that the adoption of ASU 2014-09 will have on its consolidated financial statements.
In June 2014, the FASB issued ASU 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period,” which requires a reporting entity to treat a performance target that affects vesting and that could be achieved after the requisite service period as a performance condition.ASU 2014-12 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted. ASU 2014-12 may be adopted either prospectively for share-based payment awards granted or modified on or after the effective date, or retrospectively, using a modified retrospective approach. The modified retrospective approach would apply to share-based payment awards outstanding as of the beginning of the earliest annual period presented in the financial statements on adoption, and to all new or modified awards thereafter. The Company does not expect the adoption of ASU 2014-12 to have a material impact on its consolidated financial statements.
YEAR ENDED DECEMBER 31, 20142016 COMPARED TO YEAR ENDED DECEMBER 31, 20132015
We recorded rental revenues of $302.0$428.1 million for the year ended December 31, 2014,2016, an increase of $48.7$89.7 million or 19.2%26.5% when compared to 20132015 rental revenues of $253.4$338.4 million. Of the increase in rental revenue, $18.1$16.1 million resulted from a 7.3%5.0% increase in rental revenues at the 384417 core properties considered in same store sales (those properties included in the consolidated results of operations since January 1, 2013,2015, excluding the properties we sold in 20132016 and 2014)2015, three properties purchased prior to January 1, 2015 that have not yet stabilized and three properties significantly impacted by flooding in 2016). The increase in same store rental revenues was a result of a 19550 basis point increase in average occupancy and a 4.4%4.3% increase in rental income per square foot. The remaining increase in rental revenue of $30.6$73.6 million resulted from the revenues from the acquisition of 44 properties and the lease of four145 properties completed since January 1, 2015 (excluding the four properties purchased in 2015 that had been leased since November 2013 and are included in the same store pool), slightly offset with the revenue decrease as a result of two self storageeight self-storage properties sold in 2014.2016 and three self-storage properties sold in 2015. Other operating income, which includes merchandise sales, insurance commissions,administrative fees, truck rentals, management fees and acquisition fees, increased by $3.9$6.3 million for the year ended December 31, 20142016 compared to 20132015 primarily as a result of increased commissionsadministrative fees earned on customer insurance and an increase in management and acquisition fees.insurance.
Property operations and maintenance expenses increased $8.4$21.4 million or 13.8%26.2% in 20142016 compared to 2013.2015. The 384417 core properties considered in the same store pool experienced a $2.0$1.0 million or 3.3%1.3% increase in operating expenses as a result of increases in payroll utilities, credit card fees and maintenanceinternet marketing costs. The same store pool benefited from reduced utilities, snow removal costs, insurance and yellow page advertising expense. In addition to the same store operating expense increase, operating expenses increased $6.4$20.4 million from the acquisition of 44 properties and the lease of four145 properties completed since January 1, 2013.2015 (excluding the four properties purchased in 2015 that had been leased since November 2013 and are included in the same store pool), slightly offset with the operating expense decrease as a result of eight self-storage properties sold in 2016 and three self-storage properties sold in 2015. Real estate tax expense increased $5.6$11.3 million or 30.9% in 2016 compared to 2015. The 417 core properties considered in the same store pool experienced a $1.9 million or 5.3% increase which is reflective of a net increase in property tax levies on those properties. In addition to the same store real estate expense increase, real estate taxes increased $9.4 million from the acquisition of 145 properties completed since January 1, 2015 (excluding the four properties purchased in 2015 that had been leased since November 2013 and are included in the same store pool), slightly offset with the real estate tax expense decrease as a result of a 6.3% increaseeight self-storage properties sold in property taxes on the 384 same store pool2016 and the inclusion of taxes on thethree self-storage properties acquired or leasedsold in 2014 and 2013.2015.
Our 20142016 same store results consist of only those properties that were included in our consolidated results since January 1, 2013,2015, excluding the properties we sold in 20142016 and 2013. 2015, three properties purchased prior to January 1, 2015 that have not yet stabilized and three properties significantly impacted by flooding in 2016. We believe that same store results is a meaningful measure to investors in evaluating our operating performance because, given the acquisitive nature of the industry, same store results provide information about the overall business after removing the results from those properties that were not consistent from year-to-year. Additionally, same store results are widely used in the real estate industry and the self-storage industry to measure performance. Same store results should be considered in addition to, but not as a substitute for, consolidated results in accordance with GAAP.
The following table sets forth operating data for our 384417 same store properties. These results provide information relating to property operating changes without the effects of acquisition.
Same Store Summary
Year ended December 31, | Percentage | Year ended December 31, | Percentage | |||||||||||||||||||||
(dollars in thousands) | 2014 | 2013 | Change | 2016 | 2015 | Change | ||||||||||||||||||
Same store rental income | $ | 265,788 | $ | 247,678 | 7.3 | % | $ | 339,773 | $ | 323,664 | 5.0 | % | ||||||||||||
Same store other operating income | 14,426 | 12,923 | 11.6 | % | 18,693 | 17,085 | 9.4 | % | ||||||||||||||||
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Total same store operating income | 280,214 | 260,601 | 7.5 | % | 358,466 | 340,749 | 5.2 | % | ||||||||||||||||
Payroll and benefits | 25,178 | 24,505 | 2.7 | % | 29,754 | 28,843 | 3.2 | % | ||||||||||||||||
Real estate taxes | 27,289 | 25,671 | 6.3 | % | 36,707 | 34,847 | 5.3 | % | ||||||||||||||||
Utilities | 10,608 | 10,155 | 4.5 | % | 11,217 | 11,789 | (4.9 | %) | ||||||||||||||||
Repairs and maintenance | 10,540 | 9,448 | 11.6 | % | 13,516 | 13,412 | 0.8 | % | ||||||||||||||||
Office and other operating expenses | 9,783 | 9,555 | 2.4 | % | 11,703 | 11,373 | 2.9 | % | ||||||||||||||||
Insurance | 3,987 | 4,303 | -7.3 | % | 4,035 | 4,414 | (8.6 | %) | ||||||||||||||||
Advertising and yellow pages | 1,391 | 1,528 | -9.0 | % | 1,114 | 1,352 | (17.6 | %) | ||||||||||||||||
Internet marketing | 6,409 | 5,557 | 15.3 | % | ||||||||||||||||||||
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Total same store operating expenses | 88,776 | 85,165 | 4.2 | % | 114,455 | 111,587 | 2.6 | % | ||||||||||||||||
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Same store net operating income | $ | 191,438 | $ | 175,436 | 9.1 | % | $ | 244,011 | $ | 229,162 | 6.5 | % | ||||||||||||
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Net operating income increased $38.5$63.2 million or 20.7%25.5% as a result of a 9.1%6.5% increase in our same store net operating income and the acquisitions and property leases completed since January 1, 2013.2015 (excluding the four properties purchased in 2015 that had been leased since November 2013 and are included in the same store pool).
Net operating income or “NOI” is a non-GAAP (generally accepted accounting principles) financial measure that we define as total continuing revenues less continuing property operating expenses. NOI also can be calculated by adding back to net income: interest expense, impairment and casualty losses, operating lease expense, depreciation and amortization expense, acquisition related costs, general and administrative expense, and deducting from net income: income from discontinued operations, interest income, gain on sale of real estate, and equity in income of joint ventures. We believe that NOI is a meaningful measure ofto investors in evaluating our operating performance because we utilize NOI in making decisions with respect to capital allocations, in determining current property values, and in comparing period-to-period and market-to-market property operating results. Additionally, NOI is widely used in the real estate industry and the self-storage industry to measure the performance and value of real estate assets without regard to various items included in net income that do not relate to or are not indicative of operating performance, such as depreciation and amortization, which can vary depending on accounting methods and the book value of assets. NOI should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP, such as total revenues, operating income and net income. There are material limitations to using a measure such as NOI, including the difficulty associated with comparing results among more than one company and the inability to analyze certain significant items, including depreciation and interest expense, that directly affect our net income. We compensate for these limitations by considering the economic effect of the excluded expense items independently as well as in connection with our analysis of net income.
The following table reconciles NOI generated by our self-storage facilities to our net income presented in the 20142016 and 20132015 consolidated financial statements.
Year ended December 31, | Year ended December 31, | |||||||||||||||
(dollars in thousands) | 2014 | 2013 | 2016 | 2015 | ||||||||||||
Net operating income | ||||||||||||||||
Same store | $ | 191,438 | $ | 175,436 | $ | 244,011 | $ | 229,162 | ||||||||
Other stores and management fee income | 32,782 | 10,259 | 67,333 | 18,962 | ||||||||||||
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Total net operating income | 224,220 | 185,695 | 311,344 | 248,124 | ||||||||||||
General and administrative | (40,792 | ) | (34,939 | ) | (43,103 | ) | (38,659 | ) | ||||||||
Acquisition related costs | (7,359 | ) | (3,129 | ) | (29,542 | ) | (2,991 | ) | ||||||||
Write-off of acquired property deposits | (1,783 | ) | — | |||||||||||||
Operating leases of storage facilities | (7,987 | ) | (1,331 | ) | — | (683 | ) | |||||||||
Depreciation and amortization | (51,749 | ) | (45,233 | ) | (117,081 | ) | (58,506 | ) | ||||||||
Interest expense | (34,578 | ) | (32,000 | ) | (54,504 | ) | (37,124 | ) | ||||||||
Interest income | 40 | 40 | 67 | 5 | ||||||||||||
Gain (loss) on sale of storage facilities | 15,270 | (494 | ) | |||||||||||||
Gain on sale of real estate | 5,176 | 421 | 623 | — | ||||||||||||
Equity in income of joint ventures | 2,086 | 1,948 | 3,665 | 3,405 | ||||||||||||
Income from discontinued operations | — | 3,123 | ||||||||||||||
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Net income | $ | 89,057 | $ | 74,595 | $ | 84,956 | $ | 113,077 | ||||||||
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General and administrative expenses increased $5.9$4.4 million or 16.8%11.5% from 20132015 to 2014.2016. The key drivers of the increase were $0.9 million in expenses recorded in 2016 related to the Company’s name change, and a $3.6$1.7 million increase in salaries and performance incentives, and a $0.8 millionprofessional fees mainly stemming from an increase in internet advertising.accounting fees related to the acquisition of LifeStorage, LP and an increase in legal fees related to the lawsuit in New Jersey. The remaining $1.5$1.8 million increase is the result of various other administrative costs, including increased travel expenses and software charges, related to managing the increased number of stores in our portfolio as compared to 2013.a result of the LifeStorage, LP acquisition and other smaller acquisitions in 2016.
Acquisition related costs were $7.4$29.5 million in 20142016 as a result of the acquisition of 33 stores.122 stores, including the acquisition of LifeStorage, LP. Acquisition related costs for 20132015 were $3.1$3.0 million as a result of the acquisition of 11 stores in 2013.27 stores.
The Operating leases ofoperating lease expense for storage facilities in 2013 and 2014 relate2015 relates to lease agreements enteredleases which commenced in November 2013 with respect to four self storageself-storage facilities in New York (2) and Connecticut (2). Such leases had annual lease payments of $6 million with a provision for 4% annual increases, and an exclusive option to purchase the facilities for $120 million. We exercisedcompleted the purchase option and acquiredof these four stores infacilities on February 2015.2, 2015, thus eliminating the lease payments thereafter.
Depreciation and amortization expense increased to $51.7$117.1 million in 20142016 from $45.2$58.5 million in 2013,2015, primarily as a result of amortization and depreciation onrelated to the properties acquired in 20132015 and 2014.2016 and accelerated depreciation on existing signage that is being replaced as a result of the change in name of the Company’s storage facilities from Uncle Bob’s Self Storage® to Life Storage®.
Interest expense increased from $32.0$37.1 million in 20132015 to $34.6$54.5 million in 2014.2016. The increase was mainlyprimarily due to interest on bridge loan financing entered into to facilitate the new $175LifeStorage, LP acquisition as well as interest on the $600 million 10 year3.5% senior notes issued in June 2016 and the $200 million 3.67% term unsecured noteloan entered into in April 2014,July 2016, partially offset by reduced ratesinterest costs as a result of the payoff of the $150 million 6.38% term loan in April 2016 with a draw on our bank revolvingline of credit facility and term notes. In addition, in September 2013 we replaced a maturing fixed rate term note with a bank term loan withwhich carries a lower interest rate.
During 20142016, we sold twoeight non-strategic storage facilities in Alabama (1), Georgia (1), Mississippi (1), Texas (1), and Virginia (4) for net proceeds of approximately $11.0$34.1 million, resulting in a $15.3 million gain on the salesale. During 2015, we sold three non-strategic storage facilities purchased during 2014 and 2015 in Missouri and South Carolina for net proceeds of real estateapproximately $4.6 million, resulting in a loss of $5.2approximately $0.5 million. Since the two sales occurred subsequent to the Company’s adoption of ASU 2014-08, these salesThese dispositions were not classified as discontinued operations since they did not meet the criteria for such classification under
ASU 2014-08 guidance. During 2013, we sold our equity interest and mortgage note in a formerly consolidated joint venture for $4.4 million resulting in a gain on the sale of $0.4 million.
In the 4th quarter of 2013, we sold four non-strategic facilities in Ohio, Florida (2), and Virginia for net proceeds of approximately $11.7 million resulting in a gain of approximately 2.4 million. In July and August of 2012, the Company sold 17 non-strategic storage facilities in Maryland (1), Michigan (4) and Texas (12) for net proceeds of approximately $47.7 million resulting in a gain of approximately $4.5 million. The 2013 and 2012 operations of these facilities are reported in income from discontinued operations for all periods presented.
YEAR ENDED DECEMBER 31, 20132015 COMPARED TO YEAR ENDED DECEMBER 31, 20122014
We recorded rental revenues of $253.4$338.4 million for the year ended December 31, 2013,2015, an increase of $35.5$36.4 million or 16.3%12.0% when compared to 20122014 rental revenues of $217.9$302.0 million. Of the increase in rental revenue, $15.8$16.9 million resulted from a 7.4%5.9% increase in rental revenues at the 358399 core properties considered in same store sales (those properties included in the consolidated results of operations since January 1, 2012,in 2014 and 2015, excluding the properties we sold in 20122015 and 2013)2014). The increase in same store rental revenues was a result of a 340110 basis point increase in average occupancy and a 2.6%4.3% increase in rental income per square foot. The remaining increase in rental revenue of $19.7$19.5 million resulted from the revenues from the acquisition of 3956 properties completed in 2014 and 2015 (excluding the lease of four properties completed from January 1, 2012 to December 31, 2013.purchased in 2015 that had been leased since November 2013 and are included in the same store pool), slightly offset with a revenue decrease as a result of three self-storage properties sold in 2015. Other operating income, which includes merchandise sales, insurance commissions,administrative fees, truck rentals, management fees and acquisition fees, increased by $3.9$4.1 million for the year ended December 31, 20132015 compared to 20122014 primarily as a result of increased commissionsadministrative fees earned on customer insurance.insurance and an increase in management fees.
Property operations and maintenance expenses increased $6.2$6.6 million or 11.2%8.7% in 20132015 compared to 2012.2014. The 358399 core properties considered in the same store pool experienced a $1.1$1.3 million or 2.0%1.9% increase in operating expenses as a result of increases in payroll credit card fees and snow removalmaintenance costs. The same store pool benefited from reduced utilities, insurance and yellow page advertising expense. In addition to the same store operating expense increase, operating expenses increased $5.1$5.3 million from the acquisition of 3956 properties andcompleted since January 1, 2014 (excluding the lease of four properties completed from January 1, 2012 to December 31, 2013.purchased in 2015 that had been leased since November 2013 and are included in the same store pool). Real estate tax expense increased $4.4$4.5 million as a result of a 7.4%5.2% increase in property taxes on the 358399 same store pool and the inclusion of taxes on the properties acquired or leased in 20132015 and 2012.2014.
Our 20132015 same store results consist of only those properties that were included in our consolidated results since January 1, 2012,2014, excluding the properties we sold in 20132015 and 2012.2014. The following table sets forth operating data for our 358399 same store properties. These results provide information relating to property operating changes without the effects of acquisition.
Same Store Summary
Year ended December 31, | Percentage | Year ended December 31, | Percentage | |||||||||||||||||||||
(dollars in thousands) | 2013 | 2012 | Change | 2015 | 2014 | Change | ||||||||||||||||||
Same store rental income | $ | 228,357 | $ | 212,596 | 7.4 | % | $ | 301,525 | $ | 284,613 | 5.9 | % | ||||||||||||
Same store other operating income | 12,284 | 10,745 | 14.3 | % | 16,406 | 14,791 | 10.9 | % | ||||||||||||||||
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Total same store operating income | 240,641 | 223,341 | 7.7 | % | 317,931 | 299,404 | 6.2 | % | ||||||||||||||||
Payroll and benefits | 22,521 | 22,277 | 1.1 | % | 27,469 | 26,518 | 3.6 | % | ||||||||||||||||
Real estate taxes | 22,999 | 21,417 | 7.4 | % | 31,593 | 30,041 | 5.2 | % | ||||||||||||||||
Utilities | 9,262 | 9,167 | 1.0 | % | 10,925 | 11,389 | (4.1 | %) | ||||||||||||||||
Repairs and maintenance | 8,734 | 8,488 | 2.9 | % | 12,400 | 11,256 | 10.2 | % | ||||||||||||||||
Office and other operating expenses | 8,776 | 8,339 | 5.2 | % | 10,294 | 10,390 | (0.9 | %) | ||||||||||||||||
Insurance | 3,819 | 3,435 | 11.2 | % | 4,059 | 4,152 | (2.2 | %) | ||||||||||||||||
Advertising and yellow pages | 1,411 | 1,734 | -18.6 | % | 1,297 | 1,441 | (10.0 | %) | ||||||||||||||||
Internet marketing | 5,319 | 5,307 | 0.2 | % | ||||||||||||||||||||
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Total same store operating expenses | 77,522 | 74,857 | 3.6 | % | 103,356 | 100,494 | 2.8 | % | ||||||||||||||||
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Same store net operating income | $ | 163,119 | $ | 148,484 | 9.9 | % | $ | 214,575 | $ | 198,910 | 7.9 | % | ||||||||||||
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Net operating income increased $28.9$29.5 million or 18.4%13.5% as a result of a 9.9%7.9% increase in our same store net operating income and the acquisitions completed in 2014 and property leases completed since January 1, 2012.2015.
Net operating income or “NOI” is a non-GAAP (generally accepted accounting principles) financial measure that we define as total continuing revenues less continuing property operating expenses. NOI also can be calculated by adding back to net income: interest
Reclassification
Internet advertising expense, impairment and casualty losses, operating lease expense, depreciation and amortization expense, acquisition related costs,which had been included in the general and administrative expense line in the Company’s 2014 financial statements, was reclassified to property operations and deducting
from net income: income from discontinuedmaintenance expense in 2015 to conform to the then current year presentation. The Company believes the classification of internet advertising expenses as property operations interest income, gain on saleand maintenance expense is more consistent with industry trends. As a result of real estate,this reclassification, for the year ended December 31, 2014, the Company’s financial statements show an increase in property operations and equitymaintenance expense and a reduction of general and administrative expenses of $5,570 (dollars in income of joint ventures. We believe that NOI is a meaningful measure of operating performance because we utilize NOI in making decisions with respectthousands) as compared to capital allocations, in determining current property values, and in comparing period-to-period and market-to-market property operating results. NOI should be considered in addition to, but not as a substitute for, other measures of financial performancethe amounts originally reported in accordance with GAAP, such as total revenues, operating income and net income. There are material limitations to using a measure such as NOI, including the difficulty associated with comparing results among more than one company and the inability to analyze certain significant items, including depreciation and interest expense,Company’s 2014 financial statements for that directly affect our net income. We compensate for these limitations by considering the economic effect of the excluded expense items independently as well as in connection with our analysis of net income. period.
The following table reconciles NOI generated by our self-storage facilities to our net income presented in the 20132015 and 20122014 consolidated financial statements.
Year ended December 31, | Year ended December 31, | |||||||||||||||
(dollars in thousands) | 2013 | 2012 | 2015 | 2014 | ||||||||||||
Net operating income | ||||||||||||||||
Same store | $ | 163,119 | $ | 148,484 | $ | 214,575 | $ | 198,910 | ||||||||
Other stores and management fee income | 22,576 | 8,359 | 33,549 | 19,740 | ||||||||||||
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Total net operating income | 185,695 | 156,843 | 248,124 | 218,650 | ||||||||||||
General and administrative | (34,939 | ) | (32,313 | ) | (38,659 | ) | (35,222 | ) | ||||||||
Acquisition related costs | (3,129 | ) | (4,328 | ) | (2,991 | ) | (7,359 | ) | ||||||||
Operating leases of storage facilities | (1,331 | ) | — | (683 | ) | (7,987 | ) | |||||||||
Depreciation and amortization | (45,233 | ) | (40,542 | ) | (58,506 | ) | (51,749 | ) | ||||||||
Interest expense | (32,000 | ) | (33,166 | ) | (37,124 | ) | (34,578 | ) | ||||||||
Interest income | 40 | 4 | 5 | 40 | ||||||||||||
Gain on sale of real estate | 421 | 687 | ||||||||||||||
(Loss) gain on sale of real estate | (494 | ) | 5,176 | |||||||||||||
Equity in income of joint ventures | 1,948 | 936 | 3,405 | 2,086 | ||||||||||||
Income from discontinued operations | 3,123 | 7,520 | ||||||||||||||
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Net income | $ | 74,595 | $ | 55,641 | $ | 113,077 | $ | 89,057 | ||||||||
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General and administrative expenses increased $2.6$3.4 million or 8.1%9.8% from 20122014 to 2013.2015. The key drivers of the increase were a $1.6 million increase in salaries and performance incentives, and a $1.0 million increase in internet advertising.professional fees mainly stemming from an increase in legal fees related to the lawsuit in New Jersey. The remaining $0.8 million increase is the result of various other administrative costs related to managing the increased number of stores in our portfolio as compared to 2014.
Acquisition related costs decreased by $1.2were $3.0 million in 2015 as a result of the acquisition of 27 stores. Acquisition related costs for 2014 were $7.4 million as a result of the $94.9acquisition of 33 stores in 2014, and included a $1.3 million of stores acquired or leased in 2013 compared toloan defeasance cost paid by the $189.1 million of stores acquired in 2012.Company.
The Operating leases ofoperating lease expense for storage facilities in 2013 relatethe 2015 and 2014 periods relates to lease agreements enteredleases which commenced in November 2013 with respect to four self storageself-storage facilities in New York (2) and Connecticut (2). Such leases had annual lease payments of $6 million with a provision for 4% annual increases, and an exclusive option to purchase the facilities for $120 million. We exercisedcompleted the purchase option and acquiredof these four stores infacilities on February 2015.2, 2015, which eliminated the lease payment at that time.
Depreciation and amortization expense increased to $45.2$58.5 million in 20132015 from $40.5$51.8 million in 2012,2014, primarily as a result of depreciation on the properties acquired in 20122014 and 2013.2015.
Interest expense decreasedincreased from $33.2$34.6 million in 20122014 to $32.0$37.1 million in 2013.2015. The decreaseincrease was mainly due to the refinancing of our bankadditional $175 million term note borrowings in April 2014 and additional line of credit and term notesborrowings in June 20132015 which reducedwere used to fund a portion of our interest rate on those obligations. In addition, in September 2013 we replaced a maturing fixed rate term note with a bank term loan with a lower interest rate.acquisitions.
During 2013,2015, we sold our equity interestthree non-strategic storage facilities purchased during 2014 and mortgage note2015 in Missouri and South Carolina for net proceeds of approximately $4.6 million, resulting in a formerly consolidated joint ventureloss of approximately $0.5 million. During 2014, we sold two non-strategic facilities in Texas for $4.4net proceeds of approximately $11.0 million resulting in a gain on the sale of $0.4real estate of $5.2 million. During 2012, we sold a portionSince the 2014 and 2015 sales occurred subsequent to the Company’s adoption of one of our facilities and a parcel of land for net proceeds of $3.3 million resulting in a gain of $0.7 million.
In the 4th quarter of 2013, we sold four non-strategic facilities in Ohio, Florida (2), and Virginia for net proceeds of approximately $11.7 million resulting in a gain of approximately 2.4 million. In July and August of 2012, the Company sold 17 non-strategic storage facilities in Maryland (1), Michigan (4) and Texas (12) for net proceeds of approximately $47.7 million resulting in a gain of approximately $4.5 million. The 2013 and 2012 operations ofASU 2014-08, these facilities are reported in income fromsales were not classified as discontinued operations since they did not meet the criteria for all periods presented.such classification under ASU 2014-08 guidance.
FUNDS FROM OPERATIONS
We believe that Funds from Operations (“FFO”) provides relevant and meaningful information about our operating performance that is necessary, along with net earnings and cash flows, for an understanding of our operating results. FFO adds back historical cost depreciation, which assumes the value of real estate assets diminishes predictably in the future. In fact, real estate asset values increase or decrease with market conditions. Consequently, we believe FFO is a useful supplemental measure in evaluating our operating performance by disregarding (or adding back) historical cost depreciation.
FFO is defined by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) as net income available to common shareholders computed in accordance with generally accepted accounting principles (“GAAP”), excluding gains or losses on sales of properties, plus impairment of real estate assets, plus depreciation and amortization and after adjustments to record unconsolidated partnerships and joint ventures on the same basis. We believe that to further understand our performance FFO should be compared with our reported net income and cash flows in accordance with GAAP, as presented in our consolidated financial statements.
In October and November of 2011, NAREIT issued guidance for reporting FFO that reaffirmed NAREIT’s view that impairment write-downs of depreciable real estate should be excluded from the computation of FFO. This view is based on the fact that impairment write-downs are akin to and effectively reflect the early recognition of losses on prospective sales of depreciable property or represent adjustments of previously charged depreciation. Since depreciation of real estate and gains/losses from sales are excluded from FFO, it is NAREIT’s view that it is consistent and appropriate for write-downs of depreciable real estate to also be excluded. Our calculation of FFO excludes impairment write-downs of investments in storage facilities.
Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. FFO does not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, as an alternative to net cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity, or as an indicator of our ability to make cash distributions.
Reconciliation of Net Income to Funds From Operations
For Year Ended December 31, | ||||||||||||||||||||
(dollars in thousands) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
Net income attributable to common shareholders | $ | 88,531 | $ | 74,126 | $ | 55,128 | $ | 30,592 | $ | 40,642 | ||||||||||
Net income attributable to noncontrolling interests | 526 | 469 | 513 | 937 | 1,899 | |||||||||||||||
Depreciation of real estate and amortization of intangible assets exclusive of deferred financing fees | 50,827 | 44,369 | 40,153 | 34,835 | 31,218 | |||||||||||||||
Depreciation of real estate included in discontinued operations | — | 313 | 1,137 | 1,742 | 1,938 | |||||||||||||||
Depreciation and amortization from unconsolidated joint ventures | 1,666 | 1,496 | 1,595 | 1,018 | 788 | |||||||||||||||
Casualty and impairment loss | — | — | — | 1,173 | — | |||||||||||||||
Gain on sale of real estate | (5,176 | ) | (2,852 | ) | (5,185 | ) | (1,511 | ) | (6,944 | ) | ||||||||||
Funds from operations allocable to noncontrolling interest in Operating Partnership | (806 | ) | (742 | ) | (881 | ) | (812 | ) | (885 | ) | ||||||||||
Funds from operations allocable to noncontrolling interest in consolidated joint ventures | — | — | — | (567 | ) | (1,360 | ) | |||||||||||||
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Funds from operations available to common shareholders | $ | 135,568 | $ | 117,179 | $ | 92,460 | $ | 67,407 | $ | 67,296 | ||||||||||
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For Year Ended December 31, | ||||||||||||||||||||
(dollars in thousands) | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
Net income attributable to common shareholders | $ | 85,225 | $ | 112,524 | $ | 88,531 | $ | 74,126 | $ | 55,128 | ||||||||||
Net income attributable to noncontrolling interests in the Operating Partnership | 398 | 553 | 526 | 469 | 513 | |||||||||||||||
Depreciation of real estate and amortization of intangible assets exclusive of debt issuance costs | 115,531 | 57,429 | 50,827 | 44,369 | 40,153 | |||||||||||||||
Depreciation of real estate included in discontinued operations | — | — | — | 313 | 1,137 | |||||||||||||||
Depreciation and amortization from unconsolidated joint ventures | 2,595 | 2,435 | 1,666 | 1,496 | 1,595 | |||||||||||||||
(Gain) loss on sale of real estate | (15,270 | ) | 494 | (5,176 | ) | (2,852 | ) | (5,185 | ) | |||||||||||
Funds from operations allocable to noncontrolling interest in the Operating Partnership | (857 | ) | (848 | ) | (806 | ) | (742 | ) | (881 | ) | ||||||||||
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Funds from operations available to common shareholders | $ | 187,622 | $ | 172,587 | $ | 135,568 | $ | 117,179 | $ | 92,460 | ||||||||||
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LIQUIDITY AND CAPITAL RESOURCES
Our line of credit and term notes require us to meet certain financial covenants measured on a quarterly basis, including prescribed leverage, fixed charge coverage, minimum net worth, limitations on additional indebtedness, and limitations on dividend payouts. At December 31, 2014,2016, the Company was in compliance with all debt covenants. The most sensitive covenant is the leverage ratio covenant contained in certain of our term note agreements. This covenant limits our total consolidated liabilities to 55% of our gross asset value. At December 31, 2014, our leverage ratio as defined in the agreements was approximately 37.7%. The agreements define total consolidated liabilities to include the liabilities of the Company plus our share of liabilities of unconsolidated joint ventures. The agreements also define a prescribed formula for determining gross asset value which incorporates the use of a 9.25% capitalization rate applied to annualized earnings before interest, taxes, depreciation and amortization and other items (“Adjusted EBITDA”) as defined in the agreements. In the event that the Company violates its debt covenants in the future, the amounts due under the agreements could be callable by the lenders and could adversely affect our credit rating requiring us to pay higher interest and other debt-related costs. We believe that if operating results remain consistent with historical levels and levels of other debt and liabilities remain consistent with amounts outstanding at December 31, 2014,2016, the entire availability under our line of credit could be drawn without violating our debt covenants.
Our ability to retain cash flow is limited because we operate as a REIT. In order to maintain our REIT status, a substantial portion of our operating cash flow must be used to pay dividends to our shareholders. We believe that our internally generated net cash provided by operating activities and the availability on our line of credit will be sufficient to fund ongoing operations, capital improvements, dividends and debt service requirements through April 2016, at which time $150 million of term notes mature.requirements.
Cash flows from operating activities were $146.1$225.6 million, $120.6$186.2 million, and $98.8$146.1 million for the years ended December 31, 2014, 2013,2016, 2015, and 2012,2014, respectively. The increaseincreases in operating cash flows from 20132015 to 20142016 and from 20122014 to 2013 was2015 were primarily due to an increase in net income.income as adjusted for non-cash depreciation and amortization expenses during these periods.
Cash used in investing activities was $335.0$1,796.1 million, $114.3$328.7 million, and $175.7$335.0 million for the years ended December 31, 2014, 2013,2016, 2015, and 20122014 respectively. The increase in cash used from 20132015 to 20142016 was primarily due to $281.7 million spent in 2014 to purchase 33 storage facilities compared to the $94.8 million spent in 2013 on the acquisition of 11 storage facilities. In addition, in 2014 we invested $28.6 million in an unconsolidated joint venture to fund our sharea result of the acquisition of 14 stores. In 2012 we spent $186.9 million to purchase 28 storage facilities. Also,LifeStorage, LP and other acquisitions made in 2012 we received $47.7 million from2016, partially offset by increased proceeds on the sale of storage facilities in 2016. The decrease in cash used in investing activities from 2014 to 2015 was a result of lower investments in unconsolidated joint ventures in 2015 as compared to the $11.7 million we received in 2013 and the $11.2 million received in 2014.
Cash provided by financing activities was $1,587.2 million in 2016 compared to $141.0 million in 2015. On January 20, 2016, the Company completed the public offering of 2,645,000 shares of its common stock at $105.75 per share. Net proceeds to the Company after deducting underwriting discounts and commissions and offering expenses were approximately $269.7 million. The Company used the net proceeds from this offering to repay a portion of the indebtedness then outstanding on the Company’s unsecured line of credit which had been used to fund acquisitions in the first quarter of 2016. Also on May 25, 2016, the Company completed the public offering of 6,900,000 shares of its common stock at $100.00 per share. Net proceeds to the Company after deducting underwriting discounts and commissions and offering expenses were approximately $665.4 million. The Company initially used the net proceeds from this offering to repay the indebtedness then outstanding on the Company’s unsecured line of credit. The remaining proceeds from the May offering, the proceeds from the Company’s June 2016 unsecured senior notes offering, and draws on the Company’s revolving line of credit were used to fund the purchase of LifeStorage, LP in July 2016 for approximately $1.3 billion. Cash provided by financing activities was $141.0 million in 2015 compared to $187.9 million in 2014. The decrease from 2014 compared to cash2015 was a result of a $23.0 million increase in dividends paid and a reduction in debt from 2014 to 2015. In 2015 we used in financing activities of $4.0$225.7 million in 2013. In 2014 we used the $112.7 million net proceeds from the sale of common stock and $175.0 million in term note proceeds to fund property acquisitions. In 2013, we used the $119.5 million net proceeds from the sale of common stock to paydown our line of credit and to fund a portion of the property acquisitions. In 2012 we realized $78.9 million from the sale of our common stock through our at the market equity offering and stock option plans, and $59.0$30.0 million in net proceeds from draws on our line of credit to fund property acquisitions. In 2014 we used $112.7 million in net proceeds from the sale of common stock and $175.0 million in proceeds from the issuance of a term note to fund property acquisitions.
On March 3, 2015, the Company completed the public offering of 1,380,000 shares of its common stock at $90.40 per share. Net proceeds to the Company after deducting underwriting discounts and commissions and offering expenses were approximately $119.5 million. The Company used the net proceeds from the offering to repay a portion of our acquisitions and capital improvements.
On December 10, 2014, the Company amended its existing unsecured credit agreement. As part of the amended agreement, the Company increased its revolving credit limit from $175 million to $300 million. The interest rate on the revolving credit facility bears interest at a variable rate equal to LIBOR plus a margin based on the Company’s credit rating (at December 31, 2014 the margin is 1.30%), and requires a facility fee based on the Company’s credit rating (at December 31, 2014 the facility fee is 0.20%). The amended agreement also reduced the interest rate on the $325 million unsecured term note maturing June 4, 2020, with the term note bearing interest at LIBOR plus a margin based on the Company’s credit rating (at December 31, 2014 the margin is 1.40%). The interest rate at December 31, 2014 on the Company’s line of credit was approximately 1.46% (1.67% at December 31, 2013). At December 31, 2014, there was $250.3 million available on the unsecured line of credit net of $49.0 million in outstanding borrowings and outstanding letters of credit of $0.7 million. The revolving line of credit has a maturity date of December 10, 2019. The amended agreement also provides for an increase in the revolving credit facility and the bank term notes at the Company’s request to an aggregate amount up to $850 million.
On April 8, 2014, the Company entered into a $175 million term note maturing April 2024 bearing interest at a fixed rate of 4.533%. The interest rate on the term note increases to 6.283% if the Company is not rated by at least one rating agency or if the Company’s credit rating is downgraded. The proceeds from this term note were used to repay the $115 millionindebtedness outstanding on the Company’s line of credit at April 8, 2014, with the excess proceeds used for acquisitions.
In February 2015, the Company acquired five storage facilities for a combined purchase price of $126.8 million. These acquisitions were funded with draws on the Company’sunsecured line of credit.
On August 5, 2011, the Company entered into a $100 million term note maturing August 2021 bearing interest at a fixed rate of 5.54%. The interest rate on the term note increases to 7.29% if the notes are not rated by at least one rating agency, the credit rating on the notes is downgraded or if the Company’s credit rating is downgraded. The proceeds from this term note were used to fund acquisitions and investments in unconsolidated joint ventures.
The Company also maintains a $150 million unsecured term note maturing in April 2016 bearing interest at 6.38%. The interest rate on the $150 million unsecured term note increases to 8.13% if the notes are not rated by at least one rating agency, the credit rating on the notes is downgraded or the Company’s credit rating is downgraded.
Our line of credit facility and term notes have an investment grade rating from Standard and Poor’s and Fitch Ratings (BBB-).
In addition to the unsecured financing mentioned above, our consolidated financial statements also include $2.1 million of mortgages payable at December 31, 2014, that are secured by a storage facility.
On May 12, 2014, the Company entered into a continuous equity offering program (“Equity Program”) with Wells Fargo Securities, LLC (“Wells Fargo”), Jefferies LLC (“Jefferies”), SunTrust Robinson Humphrey, Inc. (“SunTrust”), Piper Jaffray & Co. (“Piper”), HSBC Securities (USA) Inc. (“HSBC”), and BB&T Capital Markets, a division of BB&T Securities, LLC (“BB&T”), pursuant to which the Company may sell from time to time up to $225 million in aggregate offering price of shares of the Company’s common stock. Actual sales under the Equity Program will depend on a variety of factors and conditions, including, but not limited to, market conditions, the
trading price of the Company’s common stock, and determinations of the appropriate sources of funding for the Company. The Company expects to continue to offer, sell, and issue shares of common stock under the Equity Program from time to time based on various factors and conditions, although the Company is under no obligation to sell any shares under the Equity Program.
During 2014,2016, the Company did not issue any shares of common stock under the equity program. During 2015, the Company issued 924,403949,911 shares of common stock under the Equity Program at a weighted average issue price of $79.77$96.80 per share, generating net proceeds of $72.8 million after deducting $0.9 million$90.6 million. During 2014, we issued 924,403 shares under the Equity Program and 359,102 shares under our previous Equity Program for net proceeds of sales commissions paid to Piper, HSBC and BB&T.approximately $99.2 million. As of December 31, 2014,2016, the Company had $151.3has $59.3 million availableavailability for issuance of shares under the Equity Program.
During the three months ended March 31, 2014, the Company issued 359,102 shares of common stock under a previous equity program at a weighted average issue price of $74.32 per share, generating net proceeds of $26.4 million after deducting $0.3 million of sales commissions payable to SunTrust.
During 2013, the Company issued 1,667,819 shares under its previously available equity offering program at a weighted average issue price of $65.66 per share, generating net proceeds of $107.8 million after deducting $0.5 million of sales commissions payable to SunTrust, $0.5 million to Wells Fargo, and $0.5 million to Jefferies. In addition to sales commissions, the Company incurred expenses of $0.2 million in connection with thecurrent Equity Program during 2013. The Company used the proceeds from the Equity Program to reduce the outstanding balance under the Company’s revolving line of credit and to fund the acquisition of 11 storage facilities.
During 2012, the Company issued 1,391,425 shares under its previously available equity offering program with Wells Fargo at a weighted average issue price of $55.20 per share, generating net proceeds of $75.3 million after deducting $1.5 million of sales commissions payable to Wells Fargo. In addition to sales commissions paid to Wells Fargo, the Company incurred expenses of $58,000which expires in connection with this equity offering program during 2012. The Company used the proceeds from this offering to reduce the outstanding balance under the Company’s revolving line of credit.May 2017.
We implemented a Dividend Reinvestment Plan in March 2013. We issued 171,854133,666 and 68,957151,246 shares under the plan in 20142016 and 2013,2015, respectively.
During 20142016 and 2013,2015, we did not acquire any shares of our common stock via the Share Repurchase Program authorized by the Board of Directors. From the inception of the Share Repurchase Program through December 31, 2014,2016, we have reacquired a total of 1,171,886 shares pursuant to this program. From time to time, subject to market price and certain loan covenants, we may reacquire additional shares.
In January 2016, the Company exercised the expansion feature of its existing amended unsecured credit agreement and increased the revolving credit limit from $300 million to $500 million. The interest rate on the revolving credit facility bears interest at a variable rate equal to LIBOR plus a margin based on the Company’s credit rating (at December 31, 2016 the margin is 1.10%), and requires a 0.15% facility fee. The Company’s unsecured credit agreement also includes a $325 million unsecured term note maturing June 4, 2020, with the term note bearing interest at LIBOR plus a margin based on the Company’s credit rating (at December 31, 2016 the margin is 1.15%). The interest rate at December 31, 2016 on the Company’s line of credit was approximately 1.79% (1.72% at December 31, 2015). At December 31, 2016, there was $247 million available on the unsecured line of credit. The revolving line of credit has a maturity date of December 10, 2019.
On July 21, 2016, the Company entered into a $200 million term note maturing July 21, 2028 bearing interest at a fixed rate of 3.67%. The proceeds from this term note were used to repay a portion of the then outstanding balance on the Company’s line of credit.
The Company had maintained a $150 million unsecured term note that matured on April 26, 2016 bearing interest at 6.38%. The Company used a draw on the line of credit to pay off the balance of this note on April 26, 2016.
On June 20, 2016, the Company issued $600 million in aggregate principal amount of 3.50% unsecured senior notes due July 1, 2026 (the “2026 Senior Notes”). Net proceeds to the Company after original issue discount, underwriting discounts and commissions and offering expenses were approximately $591.2 million. On July 15, 2016, the proceeds from the 2026 Senior Notes, the proceeds from the Company’s common stock offering in May 2016, and draws on the Company’s line of credit were used to fund the acquisition of LifeStorage, LP. In conjunction with the issuance of the 2026 Senior Notes, the Company settled its $150 million notional forward starting swap agreements for cash of approximately $9.2 million.
On April 8, 2014, the Company entered into a $175 million term note maturing April 2024 bearing interest at a fixed rate of 4.533%. The interest rate on the term note increases to 6.283% if the Company is not rated by at least one rating agency or if the Company’s credit rating is downgraded. The proceeds from this term note were used to repay the $115 million outstanding on the Company’s line of credit at April 8, 2014, with the excess proceeds used for acquisitions.
In 2011, the Company entered into a $100 million term note maturing August 5, 2021 bearing interest at a fixed rate of 5.54%. The interest rate on the term note increases to 7.29% if the notes are not rated by at least one rating agency, the credit rating on the notes is downgraded or if the Company’s credit rating is downgraded. The proceeds from this term note were used to fund acquisitions and investments in unconsolidated joint ventures.
The line of credit and term notes require the Company to meet certain financial covenants, measured on a quarterly basis, including prescribed leverage, fixed charge coverage, minimum net worth, limitations on additional indebtedness and limitations on dividend payouts. At December 31, 2016, the Company was in compliance with its debt covenants.
We believe that if operating results remain consistent with historical levels and levels of other debt and liabilities remain consistent with amounts outstanding at December 31, 2016 the entire availability on the line of credit could be drawn without violating our debt covenants.
The Company’s fixed rate term notes contain a provision that allows for the noteholders to call the debt upon a change of control of the Company at an amount that includes a make whole premium based on rates in effect on the date of the change of control.
Our line of credit facility and term notes have an investment grade rating from Standard and Poor’s and Moody’s (Baa2).
In addition to the unsecured financing mentioned above, our consolidated financial statements also include $13.0 million of mortgages payable at December 31, 2016, that are secured by four storage facilities.
Future acquisitions, our expansion and enhancement program, and share repurchases are expected to be funded with draws on our line of credit, issuance of common and preferred stock, the issuance of unsecured term notes, sale of properties, and private placement solicitation of joint venture equity. Should the capital markets deteriorate, we may have to curtail acquisitions, our expansion and enhancement program, and share repurchases as we approach April 2016, when certain term notes mature.repurchases.
CONTRACTUAL OBLIGATIONS
The following table summarizes our future contractual obligations:
Payments due by period (in thousands) | Payments due by period (in thousands) | |||||||||||||||||||||||||||||||||||||||
Contractual obligations | Total | 2015 | 2016-2017 | 2018-2019 | 2020 and thereafter | Total | 2017 | 2018-2019 | 2020-2021 | 2022 and thereafter | ||||||||||||||||||||||||||||||
Line of credit | $ | 49,000 | — | — | $ | 49,000 | — | $ | 253,000 | $ | — | $ | 253,000 | $ | — | $ | — | |||||||||||||||||||||||
Term notes | 750,000 | — | $ | 150,000 | — | $ | 600,000 | 1,400,000 | — | — | 425,000 | 975,000 | ||||||||||||||||||||||||||||
Mortgages payable | 2,127 | $ | 134 | 293 | 330 | 1,370 | 13,027 | 353 | 765 | 3,534 | 8,375 | |||||||||||||||||||||||||||||
Interest payments | 156,688 | 29,560 | 42,348 | 39,811 | 44,969 | 407,534 | 53,970 | 107,442 | 84,928 | 161,194 | ||||||||||||||||||||||||||||||
Interest rate swap payments | 13,341 | 5,501 | 2,825 | 4,364 | 651 | 13,015 | 4,033 | 7,785 | 1,197 | — | ||||||||||||||||||||||||||||||
Standby letter of credit | 652 | 652 | — | — | — | |||||||||||||||||||||||||||||||||||
Land lease | 802 | 53 | 106 | 107 | 536 | |||||||||||||||||||||||||||||||||||
Land leases | 9,669 | 566 | 1,133 | 1,137 | 6,833 | |||||||||||||||||||||||||||||||||||
Expansion and enhancement contracts | 10,142 | 10,142 | — | — | — | 11,552 | 11,552 | — | — | — | ||||||||||||||||||||||||||||||
Building leases | 8,740 | 1,481 | 1,934 | 1,947 | 3,378 | 15,318 | 1,866 | 3,426 | 3,429 | 6,597 | ||||||||||||||||||||||||||||||
Self storage facility acquisitions | 143,680 | 143,680 | — | — | — | |||||||||||||||||||||||||||||||||||
Self-storage facility acquisitions | 67,025 | 67,025 | — | — | — | |||||||||||||||||||||||||||||||||||
Contribution to joint venture for acquisitions under contract | 21,900 | 21,900 | — | — | — | |||||||||||||||||||||||||||||||||||
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Total | $ | 1,135,172 | $ | 191,203 | $ | 197,506 | $ | 95,559 | $ | 650,904 | $ | 2,212,040 | $ | 161,265 | $ | 373,551 | $ | 519,225 | $ | 1,157,999 |
Interest payments include actual interest on fixed rate debt and estimated interest for floating-rate debt based on December 31, 20142016 rates. Interest rate swap payments include estimated net settlements of swap liabilities based on forecasted variable rates.
At December 31, 2014,2016, the Company was under contract to acquire sevenfive self-storage facilities for cash consideration of approximately $143.7 million. Five$67.0 million (net of property deposits of $3.7 million). One of the properties werewas acquired in February 20152017 from an unrelated party for $126.8$9.8 million. The purchase of the remaining facilities by the Company is subject to customary conditions to closing, and there is no assurance that these facilities will be acquired.
ACQUISITION OF PROPERTIES
In 2016, we acquired 122 self-storage facilities comprising 9.4 million square feet in Arizona (1), California (22), Colorado (6), Connecticut (2), Florida (11), Illinois (25), Massachusetts (1), Mississippi (1), New Hampshire (5), Nevada (17), New York (4), Pennsylvania (1), South Carolina (1), Texas (23), Utah (1), and Wisconsin (1) for a total purchase price of $1,783.9 million. Based on the trailing financial information of the entities from which the properties were acquired, the weighted average capitalization rate was 3.6% on these purchases and ranged from 0% on recently constructed facilities to 6.7% on mature facilities. In 2015, we acquired 27 self-storage facilities comprising 2.0 million square feet in Arizona (1), Connecticut (2), Florida (6), Illinois (2), Massachusetts (1), New York (6), North Carolina (1), Pennsylvania (1), South Carolina (6) and Texas (1) for a total purchase price of $281.2 million. Based on the trailing financial information of the entities from which the properties were acquired, the weighted average capitalization rate was 5.3% on these purchases and ranged from 0% on recently constructed facilities to 6.4% on mature facilities. Four facilities acquired in Connecticut and New York in 2015 had been leased by the Company since November 1, 2013 and the operating results of these four facilities have been included in the Company’s operations since that date. In 2014, we acquired 33 self storageself-storage facilities comprising 2.4 million square feet in Florida (4), Georgia (1), Illinois (3), Louisiana (1), Maine (2), Missouri (7), New Jersey (6), New York (1), Texas (6), Tennessee (1), and Virginia (1) for a total purchase price of $291.9 million. Based on the trailing financialsfinancial information of the entities from which the properties were acquired, the weighted average capitalization rate was 5.5% on these purchases and ranged from 0%, on a newlyrecently constructed store,facilities to 7.4%. In 2013, we acquired 11 self storage facilities comprising 0.6 million square feet in Colorado (1), Connecticut (1), Florida (1), Massachusetts (1), New Jersey (2), New York (3), and Texas (2) for a total purchase price of $94.9 million. Based on the trailing financials of the entities from which the properties were acquired, the weighted average capitalization rate was 4.8% on these purchases and ranged from 2.3% to 6.5%. In addition to the properties acquired, in November 2013 the Company entered into lease agreements with respect to four self storage facilities in New York (2) and Connecticut (2). Such leases had annual lease payments of $6 million with a provision for 4% annual increases, and an exclusive option to purchase the facilities for $120 million. We exercised our purchase option in November 2014 and completed the acquisition of these four properties in February 2015. In 2012, we acquired 28 self storage facilities comprising 2.2 million square feet in Arizona (1), Florida (8), Georgia (5), Illinois (9), North Carolina (1), Texas (3), and Virginia (1) for a total purchase price of $189.1 million.mature facilities.
FUTURE ACQUISITION AND DEVELOPMENT PLANS
Our external growth strategy is to increase the number of facilities we own by acquiring suitable facilities in markets in which we already have operations, or to expand into new markets by acquiring several facilities at once in those new markets. We are actively pursuing acquisitions in 20152017 and at December 31, 20142016 we had sevenfive properties under contract to be purchased for $143.7$67.0 million. FiveOne of the properties werewas acquired in February 2015.2017.
In 2014,2016, we added 272,000343,000 square feet to existing Properties and converted 9,00055,000 square feet to premium storage for a total cost of approximately $18.3$22.4 million. During 2013, we added 295,000 square feet to existing Properties and converted 9,000 square feet to premium storage for a total cost of approximately $17.9 million. During 2012, we added 372,000 square feet to existing Properties, and converted 35,000 square feet to premium storage for a total cost of approximately $22.5 million. From 2011 through 2014In 2016 we also installed solar panels on 18six buildings for a total cost of approximately $4.7$2.7 million. Although we do not expect to construct any new facilities in 2015,2017, we do plan to complete approximately $30$35.1 million in expansions and enhancements to existing facilities of which $3.3$12.6 million was paid prior to December 31, 2014.2016.
In 2014,2016, the Company spent approximately $20.4$38.6 million for recurring capitalized expenditures including roofing, paving, office renovations, and office renovations.new signs related to our rebranding. We expect to spend $19.4$30.2 million in 20152017 on similar capital expenditures.
DISPOSITION OF PROPERTIES
During 2016, we sold eight non-strategic storage facilities in Alabama (1), Georgia (1), Mississippi (1), Texas (1), and Virginia (4) for net proceeds of approximately $34.1 million, resulting in a $15.3 million gain on sale. During 2015, we sold three non-strategic storage facilities purchased during 2014 and 2015 in Missouri and South Carolina for net proceeds of approximately $4.6 million, resulting in a loss of approximately $0.5 million. During 2014, we sold two non-strategic storage facilities in Texas for net proceeds of approximately $11.0 million resulting in a gain of approximately $5.2 million. During 2013, we sold four non-strategic storage facilities in Florida, Ohio, and Virginia for net proceeds of approximately $11.7 million resulting in a gain of approximately $2.4 million. During 2012, we sold 17 non-strategic storage facilities in Maryland, Michigan, and Texas for net proceeds of approximately $47.7 million resulting in a gain of approximately $4.5 million.
We may seek to sell additional Properties to third parties or joint venture partners in 2015.2017.
OFF-BALANCE SHEET ARRANGEMENTS
Our off-balance sheet arrangements consist of our investment in two self storagesix self-storage joint ventures in which we have aan 85%, 20% and, 15% or 5% ownership, as well as our investment in the entity that owns the building that houses our corporate office in which we have a 49% ownership. We account for these real estate entities under the equity method. The debt held by the unconsolidated real estate entityentities is secured by the real estate owned by these entities, and is non-recourse to us. See Note 1211 to our consolidated financial statements appearing elsewhere in this annual report on Form 10-K.
REIT QUALIFICATION AND DISTRIBUTION REQUIREMENTS
As a REIT, we are not required to pay federal income tax on income that we distribute to our shareholders, provided that we satisfy certain requirements, including distributing at least 90% of our REIT taxable income for a taxable year. These distributions must be made in the year to which they relate, or in the following year if declared before we file our federal income tax return, and if they are paid not later than the date of the first regular dividend of the following year.
As a REIT, we must derive at least 95% of our total gross income from income related to real property, interest and dividends. In 2014,2016, our percentage of revenue from such sources was approximately 97%, thereby passing the 95% test, and no special measures are expected to be required to enable us to maintain our REIT designation. Although we currently intend to operate in a manner designed to qualify as a REIT, it is possible that future economic, market, legal, tax or other considerations may cause our Board of Directors to revoke our REIT election.
INTEREST RATE RISK
The primary market risk to which we believe we are exposed is interest rate risk, which may result from many factors, including government monetary and tax policies, domestic and international economic and political considerations, and other factors that are beyond our control.
We have entered into interest rate swap agreements in order to mitigate the effects of fluctuations in interest rates on our variable rate debt. Upon renewal or replacement of the credit facility, our total interest may change dependent on the terms we negotiate with the lenders; however, the LIBOR base rates have been contractually fixed on $325 million of our floating rate bank debt through the interest rate swap termination dates. Forward starting interest rate swaps are also used by the Company to hedge the risk of changes in the interest-related cash outflows associated with the potential issuance of long-term debt. See Note 8 to our consolidated financial statements appearing elsewhere in this annual report on Form 10-K.
Through September 2018, $325 million of our $374$578 million of floating rate unsecured debt is on a fixed rate basis after taking into account our interest rate swap agreements. Based on our outstanding unsecured floating rate debt of $374$578 million at December 31, 2014,2016, a 100 basis point increase in interest rates would have a $0.5$2.5 million effect on our interest expense. These amounts were determined by considering the impact of the hypothetical interest rates on our borrowing cost and our interest rate hedge agreements in effect on December 31, 2014.2016. These analyses do not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, we would consider taking actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in our capital structure.
INFLATION
We do not believe that inflation has had or will have a direct effect on our operations. Substantially all of the leases at the facilities are on a month-to-month basis which provides us with the opportunity to increase rental rates as each lease matures.
SEASONALITY
Our revenues typically have been higher in the third and fourth quarters, primarily because self-storage facilities tend to experience greater occupancy during the late spring, summer and early fall months due to the greater incidence of residential moves and college student activity during these periods. However, we believe that our customer mix, diverse geographic locations, rental structure and expense structure provide adequate protection against undue fluctuations in cash flows and net revenues during off-peak seasons. Thus, we do not expect seasonality to materially affect materially distributions to shareholders.
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
The information required is incorporated by reference to the information appearing under the caption “Interest Rate Risk” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” above.
Item 8. | Financial Statements and Supplementary Data |
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Sovran SelfLife Storage, Inc.
We have audited the accompanying consolidated balance sheets of Sovran SelfLife Storage, Inc. as of December 31, 20142016 and 2013,2015, and the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2014.2016. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’sLife Storage, Inc.’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sovran SelfLife Storage, Inc. at December 31, 20142016 and 2013,2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2014,2016, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
As discussedWe also have audited, in Note 2accordance with the standards of the Public Company Accounting Oversight Board (United States), Life Storage, Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 27, 2017 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Buffalo, New York
February 27, 2017
Report of Independent Registered Public Accounting Firm
The Board of Directors and Partners of Life Storage LP
We have audited the accompanying consolidated balance sheets of Life Storage LP as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income, partners’ capital and cash flows for each of the three years in the period ended December 31, 2016. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of Life Storage LP’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Life Storage LP at December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements Sovran Self Storage, Inc. changed its method for reporting discontinued operations effective January 1, 2014.taken as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Sovran SelfLife Storage Inc.’sLP’s internal control over financial reporting as of December 31, 2014,2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992(2013 framework) and our report dated February 24, 201527, 2017 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Buffalo, New York
February 27, 2017
SOVRAN SELFLIFE STORAGE, INC.
CONSOLIDATED BALANCE SHEETS
December 31, | December 31, | |||||||||||||||
(dollars in thousands, except share data) | 2014 | 2013 | 2016 | 2015 | ||||||||||||
Assets | ||||||||||||||||
Investment in storage facilities: | ||||||||||||||||
Land | $ | 397,642 | $ | 312,053 | $ | 786,764 | $ | 480,176 | ||||||||
Building, equipment, and construction in progress | 1,780,341 | 1,552,584 | 3,456,544 | 2,011,526 | ||||||||||||
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2,177,983 | 1,864,637 | 4,243,308 | 2,491,702 | |||||||||||||
Less: accumulated depreciation | (411,701 | ) | (366,472 | ) | (535,704 | ) | (465,195 | ) | ||||||||
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Investment in storage facilities, net | 1,766,282 | 1,498,165 | 3,707,604 | 2,026,507 | ||||||||||||
Cash and cash equivalents | 8,543 | 9,524 | 23,685 | 7,020 | ||||||||||||
Accounts receivable | 5,758 | 5,119 | 5,469 | 6,805 | ||||||||||||
Receivable from unconsolidated joint ventures | 583 | 883 | 1,223 | 929 | ||||||||||||
Investment in unconsolidated joint ventures | 57,803 | 30,391 | 67,300 | 62,520 | ||||||||||||
Prepaid expenses | 6,533 | 5,978 | 6,649 | 5,431 | ||||||||||||
Fair value of interest rate swap agreements | — | 794 | — | 550 | ||||||||||||
Trade name | 16,500 | — | ||||||||||||||
Other assets | 9,298 | 11,021 | 29,554 | 9,060 | ||||||||||||
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Total Assets | $ | 1,854,800 | $ | 1,561,875 | $ | 3,857,984 | $ | 2,118,822 | ||||||||
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Liabilities | ||||||||||||||||
Line of credit | $ | 49,000 | $ | 49,000 | $ | 253,000 | $ | 79,000 | ||||||||
Term notes | 750,000 | 575,000 | ||||||||||||||
Term notes, net | 1,387,525 | 746,650 | ||||||||||||||
Accounts payable and accrued liabilities | 43,551 | 37,741 | 75,132 | 47,839 | ||||||||||||
Deferred revenue | 7,290 | 6,708 | 9,700 | 7,511 | ||||||||||||
Fair value of interest rate swap agreements | 13,341 | 7,523 | 13,015 | 15,343 | ||||||||||||
Mortgages payable | 2,127 | 2,254 | 13,027 | 1,993 | ||||||||||||
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Total Liabilities | 865,309 | 678,226 | 1,751,399 | 898,336 | ||||||||||||
Noncontrolling redeemable Operating Partnership Units at redemption value | 13,622 | 12,940 | 18,091 | 18,171 | ||||||||||||
Shareholders’ Equity | ||||||||||||||||
Common stock $.01 par value, 100,000,000 shares authorized, 34,105,955 shares outstanding at December 31, 2014 (32,532,991 at December 31, 2013) | 353 | 337 | ||||||||||||||
Common stock $.01 par value, 100,000,000 shares authorized, 46,454,606 shares outstanding at December 31, 2016 (36,710,673 at December 31, 2015) | 464 | 367 | ||||||||||||||
Additional paid-in capital | 1,183,388 | 1,066,399 | 2,348,567 | 1,388,343 | ||||||||||||
Dividends in excess of net income | (167,692 | ) | (162,450 | ) | (239,062 | ) | (171,980 | ) | ||||||||
Accumulated other comprehensive loss | (13,005 | ) | (6,402 | ) | (21,475 | ) | (14,415 | ) | ||||||||
Treasury stock at cost, 1,171,886 shares | (27,175 | ) | (27,175 | ) | ||||||||||||
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Total Shareholders’ Equity | 975,869 | 870,709 | 2,088,494 | 1,202,315 | ||||||||||||
Noncontrolling interest in consolidated subsidiary | — | — | ||||||||||||||
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Total Equity | 2,088,494 | 1,202,315 | ||||||||||||||
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Total Liabilities and Shareholders’ Equity | $ | 1,854,800 | $ | 1,561,875 | $ | 3,857,984 | $ | 2,118,822 | ||||||||
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See notes to consolidated financial statements.
SOVRAN SELFLIFE STORAGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
(dollars in thousands, except per share data) | 2014 | 2013 | 2012 | 2016 | 2015 | 2014 | ||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Rental income | $ | 302,044 | $ | 253,384 | $ | 217,906 | $ | 428,121 | $ | 338,435 | $ | 302,044 | ||||||||||||
Other operating income | 24,036 | 20,123 | 16,176 | 34,487 | 28,167 | 24,036 | ||||||||||||||||||
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Total operating revenues | 326,080 | 273,507 | 234,082 | 462,608 | 366,602 | 326,080 | ||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Property operations and maintenance | 69,763 | 61,316 | 55,163 | 103,388 | 81,915 | 75,333 | ||||||||||||||||||
Real estate taxes | 32,097 | 26,496 | 22,076 | 47,876 | 36,563 | 32,097 | ||||||||||||||||||
General and administrative | 40,792 | 34,939 | 32,313 | 43,103 | 38,659 | 35,222 | ||||||||||||||||||
Acquisition costs | 7,359 | 3,129 | 4,328 | 29,542 | 2,991 | 7,359 | ||||||||||||||||||
Write-off of acquired property deposits | 1,783 | — | — | |||||||||||||||||||||
Operating leases of storage facilities | 7,987 | 1,331 | — | — | 683 | 7,987 | ||||||||||||||||||
Depreciation and amortization | 51,749 | 45,233 | 40,542 | 117,081 | 58,506 | 51,749 | ||||||||||||||||||
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Total operating expenses | 209,747 | 172,444 | 154,422 | 342,773 | 219,317 | 209,747 | ||||||||||||||||||
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Income from operations | 116,333 | 101,063 | 79,660 | 119,835 | 147,285 | 116,333 | ||||||||||||||||||
Other income (expenses) | ||||||||||||||||||||||||
Interest expense | (34,578 | ) | (32,000 | ) | (33,166 | ) | (47,175 | ) | (37,124 | ) | (34,578 | ) | ||||||||||||
Interest expense – bridge financing commitment fee | (7,329 | ) | — | — | ||||||||||||||||||||
Interest income | 40 | 40 | 4 | 67 | 5 | 40 | ||||||||||||||||||
Gain on sale of storage facilities | 5,176 | — | — | |||||||||||||||||||||
Gain (loss) on sale of storage facilities | 15,270 | (494 | ) | 5,176 | ||||||||||||||||||||
Gain on sale of real estate | — | 421 | 687 | 623 | — | — | ||||||||||||||||||
Equity in income of joint ventures | 2,086 | 1,948 | 936 | 3,665 | 3,405 | 2,086 | ||||||||||||||||||
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Income from continuing operations | 89,057 | 71,472 | 48,121 | |||||||||||||||||||||
Income from discontinued operations (including a gain on disposal of $2,431 in 2013 and $4,498 in 2012) | — | 3,123 | 7,520 | |||||||||||||||||||||
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Net income | 89,057 | 74,595 | 55,641 | 84,956 | 113,077 | 89,057 | ||||||||||||||||||
Net income attributable to noncontrolling interest | (526 | ) | (469 | ) | (513 | ) | ||||||||||||||||||
Net income attributable to noncontrolling interest in the Operating Partnership | (398 | ) | (553 | ) | (526 | ) | ||||||||||||||||||
Net loss attributable to noncontrolling interest in consolidated subsidiary | 667 | — | — | |||||||||||||||||||||
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Net income attributable to common shareholders | $ | 88,531 | $ | 74,126 | $ | 55,128 | $ | 85,225 | $ | 112,524 | $ | 88,531 | ||||||||||||
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Earnings per common share attributable to common shareholders - basic | $ | 1.97 | $ | 3.18 | $ | 2.68 | ||||||||||||||||||
Continuing operations | $ | 2.68 | $ | 2.27 | $ | 1.62 | ||||||||||||||||||
Discontinued operations | — | 0.10 | 0.26 | |||||||||||||||||||||
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Earnings per share - basic | $ | 2.68 | $ | 2.37 | $ | 1.88 | ||||||||||||||||||
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Earnings per common share attributable to common shareholders - diluted | $ | 1.96 | $ | 3.16 | $ | 2.67 | ||||||||||||||||||
Continuing operations | $ | 2.67 | $ | 2.26 | $ | 1.61 | ||||||||||||||||||
Discontinued operations | — | 0.10 | 0.26 | |||||||||||||||||||||
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Earnings per share - diluted | $ | 2.67 | $ | 2.36 | $ | 1.87 | ||||||||||||||||||
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See notes to consolidated financial statements.
SOVRAN SELFLIFE STORAGE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
(dollars in thousands, except per share data) | 2014 | 2013 | 2012 | |||||||||||||||||||||
(dollars in thousands) | 2016 | 2015 | 2014 | |||||||||||||||||||||
Net income | $ | 89,057 | $ | 74,595 | $ | 55,641 | $ | 84,956 | $ | 113,077 | $ | 89,057 | ||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||
Change in fair value of derivatives net of reclassification to interest expense | (6,603 | ) | 8,840 | (4,987 | ) | |||||||||||||||||||
Effective portion of loss on derivatives net of reclassification to interest expense | (7,060 | ) | (1,410 | ) | (6,603 | ) | ||||||||||||||||||
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Total comprehensive income | 82,454 | 83,435 | 50,654 | 77,896 | 111,667 | 82,454 | ||||||||||||||||||
Comprehensive income attributable to noncontrolling interest | (487 | ) | (525 | ) | (467 | ) | ||||||||||||||||||
Comprehensive income attributable to noncontrolling interest in the Operating Partnership | (365 | ) | (546 | ) | (487 | ) | ||||||||||||||||||
Comprehensive loss attributable to noncontrolling interest in consolidated subsidiary | 667 | — | — | |||||||||||||||||||||
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Comprehensive income attributable to common shareholders | $ | 81,967 | $ | 82,910 | $ | 50,187 | $ | 78,198 | $ | 111,121 | $ | 81,967 | ||||||||||||
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See notes to consolidated financial statements.
SOVRAN SELFLIFE STORAGE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(dollars in thousands, except share data) | Common Stock Shares | Common Stock | Additional Paid-in Capital | Dividends in Excess of Net Income | Accumulated Other Comprehensive Income (loss) | Treasury Stock | Total Shareholders’ Equity | Common Stock Shares | Common Stock | Additional Paid-in Capital | Dividends in Excess of Net Income | Accumulated Other Comprehensive Income (loss) | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||||||||||
Balance January 1, 2012 | 28,952,356 | $ | 301 | $ | 862,467 | $ | (169,799 | ) | $ | (10,255 | ) | $ | (27,175 | ) | $ | 655,539 | ||||||||||||||||||||||||||||||||||||
Net proceeds from the issuance of common stock | 1,400,931 | 14 | 75,192 | — | — | — | 75,206 | |||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 91,520 | 1 | 3,735 | — | — | — | 3,736 | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of non-vested stock | 1,813 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Earned portion of non-vested stock | — | — | 2,392 | — | — | — | 2,392 | |||||||||||||||||||||||||||||||||||||||||||||
Stock option expense | — | — | 280 | — | — | — | 280 | |||||||||||||||||||||||||||||||||||||||||||||
Deferred compensation outside directors | — | — | 122 | — | — | — | 122 | |||||||||||||||||||||||||||||||||||||||||||||
Carrying value less than redemption value on redeemed noncontrolling interest | — | — | (584 | ) | — | — | — | (584 | ) | |||||||||||||||||||||||||||||||||||||||||||
Adjustment to redemption value of noncontrolling redeemable Operating Partnership Units | — | — | — | (5,088 | ) | — | — | (5,088 | ) | |||||||||||||||||||||||||||||||||||||||||||
Net income attributable to common shareholders | — | — | — | 55,128 | — | — | 55,128 | |||||||||||||||||||||||||||||||||||||||||||||
Change in fair value of derivatives | — | — | — | — | (4,987 | ) | — | (4,987 | ) | |||||||||||||||||||||||||||||||||||||||||||
Dividends | — | — | — | (53,014 | ) | — | — | (53,014 | ) | |||||||||||||||||||||||||||||||||||||||||||
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Balance December 31, 2012 | 30,446,620 | $ | 316 | $ | 943,604 | $ | (172,773 | ) | $ | (15,242 | ) | $ | (27,175 | ) | $ | 728,730 | ||||||||||||||||||||||||||||||||||||
Net proceeds from the issuance of common stock | 1,667,819 | 17 | 107,810 | — | — | — | 107,827 | |||||||||||||||||||||||||||||||||||||||||||||
Net proceeds from the issuance of common stock through Dividend Reinvestment Plan | 68,957 | 1 | 4,677 | — | — | — | 4,678 | |||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 160,515 | 1 | 7,016 | — | — | — | 7,017 | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of non-vested stock | 189,080 | 2 | (2 | ) | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Earned portion of non-vested stock | — | — | 2,876 | — | — | — | 2,876 | |||||||||||||||||||||||||||||||||||||||||||||
Stock option expense | — | — | 301 | — | — | — | 301 | |||||||||||||||||||||||||||||||||||||||||||||
Deferred compensation outside directors | — | — | 118 | — | — | — | 118 | |||||||||||||||||||||||||||||||||||||||||||||
Carrying value less than redemption value on redeemed noncontrolling interest | — | — | (1 | ) | — | — | — | (1 | ) | |||||||||||||||||||||||||||||||||||||||||||
Adjustment to redemption value of noncontrolling redeemable Operating Partnership Units | — | — | — | (524 | ) | — | — | (524 | ) | |||||||||||||||||||||||||||||||||||||||||||
Net income attributable to common shareholders | — | — | — | 74,126 | — | — | 74,126 | |||||||||||||||||||||||||||||||||||||||||||||
Change in fair value of derivatives | — | — | — | — | 8,840 | — | 8,840 | |||||||||||||||||||||||||||||||||||||||||||||
Dividends | — | — | — | (63,279 | ) | — | — | (63,279 | ) | |||||||||||||||||||||||||||||||||||||||||||
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Balance December 31, 2013 | 32,532,991 | $ | 337 | $ | 1,066,399 | $ | (162,450 | ) | $ | (6,402 | ) | $ | (27,175 | ) | $ | 870,709 | ||||||||||||||||||||||||||||||||||||
Balance January 1, 2014 | 32,532,991 | $ | 325 | $ | 1,039,236 | $ | (162,450 | ) | $ | (6,402 | ) | $ | 870,709 | |||||||||||||||||||||||||||||||||||||||
Net proceeds from the issuance of common stock | 1,283,505 | 13 | 98,968 | — | — | — | 98,981 | 1,283,505 | 13 | 98,968 | — | — | 98,981 | |||||||||||||||||||||||||||||||||||||||
Net proceeds from the issuance of common stock through Dividend Reinvestment Plan | 171,854 | 2 | 12,447 | — | — | — | 12,449 | 171,854 | 2 | 12,447 | — | — | 12,449 | |||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 27,462 | — | 1,245 | — | — | — | 1,245 | 27,462 | — | 1,245 | — | — | 1,245 | |||||||||||||||||||||||||||||||||||||||
Issuance of non-vested stock | 90,143 | 1 | (1 | ) | — | — | — | — | 90,143 | 1 | (1 | ) | — | — | — | |||||||||||||||||||||||||||||||||||||
Earned portion of non-vested stock | — | — | 4,556 | — | — | — | 4,556 | — | — | 4,556 | — | — | 4,556 | |||||||||||||||||||||||||||||||||||||||
Stock option expense | — | — | 223 | — | — | — | 223 | — | — | 223 | — | — | 223 | |||||||||||||||||||||||||||||||||||||||
Deferred compensation outside directors | — | — | 121 | — | — | — | 121 | — | — | 121 | — | — | 121 | |||||||||||||||||||||||||||||||||||||||
Carrying value less than redemption value on redeemed noncontrolling interest | — | — | (570 | ) | — | — | — | (570 | ) | — | — | (570 | ) | — | — | (570 | ) | |||||||||||||||||||||||||||||||||||
Adjustment to redemption value of noncontrolling redeemable Operating Partnership Units | — | — | — | (3,738 | ) | — | — | (3,738 | ) | — | — | — | (3,738 | ) | — | (3,738 | ) | |||||||||||||||||||||||||||||||||||
Net income attributable to common shareholders | — | — | — | 88,531 | — | — | 88,531 | — | — | — | 88,531 | — | 88,531 | |||||||||||||||||||||||||||||||||||||||
Change in fair value of derivatives | — | — | — | — | (6,603 | ) | — | (6,603 | ) | — | — | — | — | (6,603 | ) | (6,603 | ) | |||||||||||||||||||||||||||||||||||
Dividends | — | — | — | (90,035 | ) | — | — | (90,035 | ) | — | — | — | (90,035 | ) | — | (90,035 | ) | |||||||||||||||||||||||||||||||||||
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|
|
|
| ||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2014 | 34,105,955 | $ | 353 | $ | 1,183,388 | $ | (167,692 | ) | $ | (13,005 | ) | $ | (27,175 | ) | $ | 975,869 | 34,105,955 | 341 | 1,156,225 | (167,692 | ) | (13,005 | ) | 975,869 | ||||||||||||||||||||||||||||
Net proceeds from the issuance of common stock | 2,329,911 | 23 | 210,119 | — | — | 210,142 | ||||||||||||||||||||||||||||||||||||||||||||||
Net proceeds from the issuance of common stock through Dividend Reinvestment Plan | 151,246 | 1 | 13,925 | — | — | 13,926 | ||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 30,900 | 1 | 1,632 | — | — | 1,633 | ||||||||||||||||||||||||||||||||||||||||||||||
Issuance of non-vested stock | 64,244 | 1 | (1 | ) | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Earned portion of non-vested stock | — | — | 6,254 | — | — | 6,254 | ||||||||||||||||||||||||||||||||||||||||||||||
Stock option expense | — | — | 210 | — | — | 210 | ||||||||||||||||||||||||||||||||||||||||||||||
Deferred compensation outside directors | 28,417 | — | 59 | — | — | 59 | ||||||||||||||||||||||||||||||||||||||||||||||
Carrying value less than redemption value on redeemed noncontrolling interest | — | — | (80 | ) | — | — | (80 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Adjustment to redemption value of noncontrolling redeemable Operating Partnership Units | — | — | — | (3,328 | ) | — | (3,328 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to common shareholders | — | — | — | 112,524 | — | 112,524 | ||||||||||||||||||||||||||||||||||||||||||||||
Change in fair value of derivatives | — | — | — | — | (1,410 | ) | (1,410 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Dividends | — | — | — | (113,484 | ) | — | (113,484 | ) | ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2015 | 36,710,673 | 367 | 1,388,343 | (171,980 | ) | (14,415 | ) | 1,202,315 | ||||||||||||||||||||||||||||||||||||||||||||
Net proceeds from the issuance of common stock | 9,545,000 | 96 | 934,867 | — | — | 934,963 | ||||||||||||||||||||||||||||||||||||||||||||||
Net proceeds from the issuance of common stock through Dividend Reinvestment Plan | 133,666 | 1 | 13,165 | — | — | 13,166 | ||||||||||||||||||||||||||||||||||||||||||||||
Conversion of operating partnership units to common shares | 41,862 | — | 4,795 | — | — | 4,795 | ||||||||||||||||||||||||||||||||||||||||||||||
Issuance of non-vested stock | 23,405 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Earned portion of non-vested stock | — | — | 7,216 | — | — | 7,216 | ||||||||||||||||||||||||||||||||||||||||||||||
Stock option expense | — | — | 89 | — | — | 89 | ||||||||||||||||||||||||||||||||||||||||||||||
Deferred compensation outside directors | — | — | 92 | — | — | 92 | ||||||||||||||||||||||||||||||||||||||||||||||
Adjustment to redemption value of noncontrolling redeemable Operating Partnership Units | — | — | — | 4,457 | — | 4,457 | ||||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to common shareholders | — | — | — | 85,225 | — | 85,225 | ||||||||||||||||||||||||||||||||||||||||||||||
Amortization of terminated hedge included in AOCI | — | — | — | — | 458 | 458 | ||||||||||||||||||||||||||||||||||||||||||||||
Change in fair value of derivatives | — | — | — | — | (7,518 | ) | (7,518 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Dividends | — | — | — | (156,764 | ) | — | (156,764 | ) | ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2016 | 46,454,606 | $ | 464 | $ | 2,348,567 | $ | (239,062 | ) | $ | (21,475 | ) | $ | 2,088,494 | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
See notes to consolidated financial statements
SOVRAN SELFLIFE STORAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
(dollars in thousands) | 2014 | 2013 | 2012 | 2016 | 2015 | 2014 | ||||||||||||||||||
Operating Activities | ||||||||||||||||||||||||
Net income | $ | 89,057 | $ | 74,595 | $ | 55,641 | $ | 84,956 | $ | 113,077 | $ | 89,057 | ||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||||||
Depreciation and amortization | 51,749 | 45,546 | 41,679 | 117,081 | 58,506 | 51,749 | ||||||||||||||||||
Amortization of deferred financing fees | 942 | 834 | 836 | |||||||||||||||||||||
Gain on sale of storage facilities | (5,176 | ) | — | — | ||||||||||||||||||||
Gain on disposal of discontinued operations | — | (2,431 | ) | (4,498 | ) | |||||||||||||||||||
Amortization of debt issuance costs and bond discount | 9,688 | 1,184 | 942 | |||||||||||||||||||||
(Gain) loss on sale of storage facilities | (15,270 | ) | 494 | (5,176 | ) | |||||||||||||||||||
Gain on sale of real estate | — | (421 | ) | (687 | ) | (623 | ) | — | — | |||||||||||||||
Equity in (income) losses of joint ventures | (2,086 | ) | (1,948 | ) | (936 | ) | ||||||||||||||||||
Write-off of acquired property deposits | 1,783 | — | — | |||||||||||||||||||||
Equity in income of joint ventures | (3,665 | ) | (3,405 | ) | (2,086 | ) | ||||||||||||||||||
Distributions from unconsolidated joint venture | 3,123 | 2,630 | 2,184 | 5,207 | 4,821 | 3,123 | ||||||||||||||||||
Non-vested stock earned | 4,677 | 2,994 | 2,513 | 7,308 | 6,313 | 4,677 | ||||||||||||||||||
Stock option expense | 223 | 301 | 280 | 89 | 210 | 223 | ||||||||||||||||||
Changes in assets and liabilities (excluding the effects of acquisitions): | ||||||||||||||||||||||||
Accounts receivable | (606 | ) | (1,659 | ) | (451 | ) | 4,814 | (1,038 | ) | (606 | ) | |||||||||||||
Prepaid expenses | (457 | ) | (810 | ) | (977 | ) | (230 | ) | 1,132 | (457 | ) | |||||||||||||
Receipts from (advances to) joint ventures | 590 | (27 | ) | (242 | ) | |||||||||||||||||||
(Advances to) receipts from joint ventures | (294 | ) | (346 | ) | 590 | |||||||||||||||||||
Accounts payable and other liabilities | 5,187 | 1,079 | 4,240 | 18,494 | 5,847 | 5,187 | ||||||||||||||||||
Deferred revenue | (1,155 | ) | (37 | ) | (820 | ) | (3,788 | ) | (597 | ) | (1,155 | ) | ||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Net cash provided by operating activities | 146,068 | 120,646 | 98,762 | 225,550 | 186,198 | 146,068 | ||||||||||||||||||
Investing Activities | ||||||||||||||||||||||||
Acquisition of storage facilities | (281,731 | ) | (94,759 | ) | (186,870 | ) | ||||||||||||||||||
Acquisition of storage facilities, net of cash acquired | (1,750,267 | ) | (280,010 | ) | (281,731 | ) | ||||||||||||||||||
Improvements, equipment additions, and construction in progress | (35,097 | ) | (33,889 | ) | (36,845 | ) | (72,852 | ) | (41,739 | ) | (35,097 | ) | ||||||||||||
Net proceeds from the sale of storage facilities | 11,191 | — | — | 34,074 | 4,646 | 11,191 | ||||||||||||||||||
Net proceeds from the disposal of discontinued operations | — | 11,741 | 47,698 | |||||||||||||||||||||
Net proceeds from the sale of real estate | — | 4,866 | 3,298 | 623 | — | — | ||||||||||||||||||
Casualty insurance proceeds received | — | — | 626 | |||||||||||||||||||||
Investment in unconsolidated joint ventures | (28,650 | ) | (4,237 | ) | (3,571 | ) | (6,438 | ) | (6,151 | ) | (28,650 | ) | ||||||||||||
Return of capital from unconsolidated joint ventures | — | 7,360 | — | |||||||||||||||||||||
Property deposits | (706 | ) | (5,427 | ) | — | (1,209 | ) | (5,435 | ) | (706 | ) | |||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Net cash used in investing activities | (334,993 | ) | (114,345 | ) | (175,664 | ) | (1,796,069 | ) | (328,689 | ) | (334,993 | ) | ||||||||||||
Financing Activities | ||||||||||||||||||||||||
Net proceeds from sale of common stock | 112,676 | 119,522 | 78,943 | 948,129 | 225,701 | 112,676 | ||||||||||||||||||
Proceeds from line of credit | 202,000 | 152,000 | 154,000 | 1,102,000 | 330,000 | 202,000 | ||||||||||||||||||
Proceeds from term notes | 175,000 | 325,000 | — | |||||||||||||||||||||
Repayment of line of credit | (202,000 | ) | (208,000 | ) | (95,000 | ) | (928,000 | ) | (300,000 | ) | (202,000 | ) | ||||||||||||
Repayment of term notes | — | (325,000 | ) | — | ||||||||||||||||||||
Financing costs | (3,001 | ) | (1,554 | ) | — | |||||||||||||||||||
Proceeds from term notes, net of discount | 796,682 | — | 175,000 | |||||||||||||||||||||
Repayment of term note | (150,000 | ) | — | — | ||||||||||||||||||||
Debt issuance costs | (15,273 | ) | — | (3,001 | ) | |||||||||||||||||||
Settlement of forward starting interest rate swaps | (9,166 | ) | — | — | ||||||||||||||||||||
Dividends paid - common stock | (90,035 | ) | (63,279 | ) | (53,014 | ) | (156,249 | ) | (113,039 | ) | (90,035 | ) | ||||||||||||
Distributions to noncontrolling interest holders | (541 | ) | (402 | ) | (549 | ) | (742 | ) | (555 | ) | (541 | ) | ||||||||||||
Redemption of operating partnership units | (6,028 | ) | (322 | ) | (7,372 | ) | — | (1,005 | ) | (6,028 | ) | |||||||||||||
Mortgage principal payments | (127 | ) | (1,997 | ) | (172 | ) | (197 | ) | (134 | ) | (127 | ) | ||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Net cash provided by (used in) financing activities | 187,944 | (4,032 | ) | 76,836 | ||||||||||||||||||||
Net cash provided by financing activities | 1,587,184 | 140,968 | 187,944 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Net (decrease) increase in cash | (981 | ) | 2,269 | (66 | ) | |||||||||||||||||||
Net increase (decrease) in cash | 16,665 | (1,523 | ) | (981 | ) | |||||||||||||||||||
Cash at beginning of period | 9,524 | 7,255 | 7,321 | 7,020 | 8,543 | 9,524 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Cash at end of period | $ | 8,543 | $ | 9,524 | $ | 7,255 | $ | 23,685 | $ | 7,020 | $ | 8,543 | ||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Supplemental cash flow information | ||||||||||||||||||||||||
Cash paid for interest, net of interest capitalized | $ | 31,764 | $ | 32,909 | $ | 32,402 | $ | 39,856 | $ | 35,926 | $ | 31,764 | ||||||||||||
Cash paid for income taxes, net of refunds | $ | 981 | $ | 1,084 | $ | 665 |
See notes to consolidated financial statements.
SOVRAN SELFLIFE STORAGE LP
CONSOLIDATED BALANCE SHEETS
December 31, | ||||||||
(dollars in thousands, except unit data) | 2016 | 2015 | ||||||
Assets | ||||||||
Investment in storage facilities: | ||||||||
Land | $ | 786,764 | $ | 480,176 | ||||
Building, equipment, and construction in progress | 3,456,544 | 2,011,526 | ||||||
|
|
|
| |||||
4,243,308 | 2,491,702 | |||||||
Less: accumulated depreciation | (535,704 | ) | (465,195 | ) | ||||
|
|
|
| |||||
Investment in storage facilities, net | 3,707,604 | 2,026,507 | ||||||
Cash and cash equivalents | 23,685 | 7,020 | ||||||
Accounts receivable | 5,469 | 6,805 | ||||||
Receivable from unconsolidated joint ventures | 1,223 | 929 | ||||||
Investment in unconsolidated joint ventures | 67,300 | 62,520 | ||||||
Prepaid expenses | 6,649 | 5,431 | ||||||
Fair value of interest rate swap agreements | — | 550 | ||||||
Trade name | 16,500 | — | ||||||
Other assets | 29,554 | 9,060 | ||||||
|
|
|
| |||||
Total Assets | $ | 3,857,984 | $ | 2,118,822 | ||||
|
|
|
| |||||
Liabilities | ||||||||
Line of credit | $ | 253,000 | $ | 79,000 | ||||
Term notes, net | 1,387,525 | 746,650 | ||||||
Accounts payable and accrued liabilities | 75,132 | 47,839 | ||||||
Deferred revenue | 9,700 | 7,511 | ||||||
Fair value of interest rate swap agreements | 13,015 | 15,343 | ||||||
Mortgages payable | 13,027 | 1,993 | ||||||
|
|
|
| |||||
Total Liabilities | 1,751,399 | 898,336 | ||||||
Limited partners’ redeemable capital interest at redemption value (217,481 and 168,866 units outstanding at December 31, 2016 and December 31, 2015, respectively) | 18,091 | 18,171 | ||||||
Partners’ Capital | ||||||||
General partner (466,721 and 368,795 units outstanding at December 31, 2016 and December 31, 2015, respectively) | 21,065 | 12,205 | ||||||
Limited partners (45,987,885 and 36,341,878 units outstanding at December 31, 2016 and December 31, 2015, respectively) | 2,088,904 | 1,204,525 | ||||||
Accumulated other comprehensive loss | (21,475 | ) | (14,415 | ) | ||||
|
|
|
| |||||
Total Controlling Partners’ Capital | 2,088,494 | 1,202,315 | ||||||
Noncontrolling interest in consolidated subsidiary | — | — | ||||||
|
|
|
| |||||
Total Partners’ Capital | 2,088,494 | 1,202,315 | ||||||
|
|
|
| |||||
Total Liabilities and Partners’ Capital | $ | 3,857,984 | $ | 2,118,822 | ||||
|
|
|
|
See notes to consolidated financial statements.
LIFE STORAGE LP
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, | ||||||||||||
(dollars in thousands, except per unit data) | 2016 | 2015 | 2014 | |||||||||
Revenues | ||||||||||||
Rental income | $ | 428,121 | $ | 338,435 | $ | 302,044 | ||||||
Other operating income | 34,487 | 28,167 | 24,036 | |||||||||
|
|
|
|
|
| |||||||
Total operating revenues | 462,608 | 366,602 | 326,080 | |||||||||
Expenses | ||||||||||||
Property operations and maintenance | 103,388 | 81,915 | 75,333 | |||||||||
Real estate taxes | 47,876 | 36,563 | 32,097 | |||||||||
General and administrative | 43,103 | 38,659 | 35,222 | |||||||||
Acquisition costs | 29,542 | 2,991 | 7,359 | |||||||||
Write-off of acquired property deposits | 1,783 | — | — | |||||||||
Operating leases of storage facilities | — | 683 | 7,987 | |||||||||
Depreciation and amortization | 117,081 | 58,506 | 51,749 | |||||||||
|
|
|
|
|
| |||||||
Total operating expenses | 342,773 | 219,317 | 209,747 | |||||||||
|
|
|
|
|
| |||||||
Income from operations | 119,835 | 147,285 | 116,333 | |||||||||
Other income (expenses) | ||||||||||||
Interest expense | (47,175 | ) | (37,124 | ) | (34,578 | ) | ||||||
Interest expense – bridge financing commitment fee | (7,329 | ) | — | — | ||||||||
Interest income | 67 | 5 | 40 | |||||||||
Gain (loss) on sale of storage facilities | 15,270 | (494 | ) | 5,176 | ||||||||
Gain on sale of real estate | 623 | — | — | |||||||||
Equity in income of joint ventures | 3,665 | 3,405 | 2,086 | |||||||||
|
|
|
|
|
| |||||||
Net income | 84,956 | 113,077 | 89,057 | |||||||||
Net income attributable to noncontrolling interest in the Operating Partnership | (398 | ) | (553 | ) | (526 | ) | ||||||
Net loss attributable to noncontrolling interest in consolidated subsidiary | 667 | — | — | |||||||||
|
|
|
|
|
| |||||||
Net income attributable to common unitholders | $ | 85,225 | $ | 112,524 | $ | 88,531 | ||||||
|
|
|
|
|
| |||||||
Earnings per common unit attributable to common unitholders - basic | $ | 1.97 | $ | 3.18 | $ | 2.68 | ||||||
|
|
|
|
|
| |||||||
Earnings per common unit attributable to common unitholders - diluted | $ | 1.96 | $ | 3.16 | $ | 2.67 | ||||||
|
|
|
|
|
| |||||||
Net income attributable to general partner | $ | 856 | $ | 1,131 | $ | 891 | ||||||
Net income attributable to limited partners | 84,369 | 111,393 | 87,640 |
See notes to consolidated financial statements.
LIFE STORAGE LP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended December 31, | ||||||||||||
(dollars in thousands) | 2016 | 2015 | 2014 | |||||||||
Net income | $ | 84,956 | $ | 113,077 | $ | 89,057 | ||||||
Other comprehensive income: | ||||||||||||
Effective portion of loss on derivatives net of reclassification to interest expense | (7,060 | ) | (1,410 | ) | (6,603 | ) | ||||||
|
|
|
|
|
| |||||||
Total comprehensive income | 77,896 | 111,667 | 82,454 | |||||||||
Comprehensive income attributable to noncontrolling interest in the Operating Partnership | (365 | ) | (546 | ) | (487 | ) | ||||||
Comprehensive loss attributable to noncontrolling interest in consolidated subsidiary | 667 | — | — | |||||||||
|
|
|
|
|
| |||||||
Comprehensive income attributable to common unitholders | $ | 78,198 | $ | 111,121 | $ | 81,967 | ||||||
|
|
|
|
|
|
See notes to consolidated financial statements.
LIFE STORAGE LP
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
(dollars in thousands) | Life Storage Holdings, Inc. General Partner | Life Storage, Inc. Limited Partner | Accumulated Other Comprehensive Income (loss) | Total Controlling Partners’ Capital | ||||||||||||
Balance January 1, 2014 | $ | 8,836 | $ | 868,275 | $ | (6,402 | ) | $ | 870,709 | |||||||
Net proceeds from the issuance of Partnership Units | 1,014 | 97,967 | — | 98,981 | ||||||||||||
Net proceeds from the issuance of Partnership Units through Dividend Reinvestment Plan | 124 | 12,325 | — | 12,449 | ||||||||||||
Exercise of stock options | 13 | 1,232 | — | 1,245 | ||||||||||||
Earned portion of non-vested stock | 46 | 4,510 | — | 4,556 | ||||||||||||
Stock option expense | 2 | 221 | — | 223 | ||||||||||||
Deferred compensation outside directors | 1 | 120 | — | 121 | ||||||||||||
Carrying value less than redemption value on redeemed noncontrolling interest | (60 | ) | (510 | ) | — | (570 | ) | |||||||||
Adjustment to redemption value of noncontrolling redeemable Operating Partnership Units | — | (3,738 | ) | — | (3,738 | ) | ||||||||||
Net income attributable to common unitholders | 891 | 87,640 | — | 88,531 | ||||||||||||
Change in fair value of derivatives | (66 | ) | 66 | (6,603 | ) | (6,603 | ) | |||||||||
Distributions | (906 | ) | (89,129 | ) | — | (90,035 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Balance December 31, 2014 | 9,895 | 978,979 | (13,005 | ) | 975,869 | |||||||||||
Net proceeds from the issuance of Partnership Units | 2,123 | 208,019 | — | 210,142 | ||||||||||||
Net proceeds from the issuance of Partnership Units through Dividend Reinvestment Plan | 139 | 13,787 | — | 13,926 | ||||||||||||
Exercise of stock options | 16 | 1,617 | — | 1,633 | ||||||||||||
Earned portion of non-vested stock | 63 | 6,191 | — | 6,254 | ||||||||||||
Stock option expense | 2 | 208 | — | 210 | ||||||||||||
Deferred compensation outside directors | — | 59 | — | 59 | ||||||||||||
Carrying value less than redemption value on redeemed noncontrolling interest | (10 | ) | (70 | ) | — | (80 | ) | |||||||||
Adjustment to redemption value of noncontrolling redeemable Operating Partnership Units | — | (3,328 | ) | — | (3,328 | ) | ||||||||||
Net income attributable to common unitholders | 1,131 | 111,393 | — | 112,524 | ||||||||||||
Change in fair value of derivatives | (14 | ) | 14 | (1,410 | ) | (1,410 | ) | |||||||||
Distributions | (1,140 | ) | (112,344 | ) | — | (113,484 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Balance December 31, 2015 | 12,205 | 1,204,525 | (14,415 | ) | 1,202,315 | |||||||||||
Net proceeds from the issuance of Partnership Units | 9,349 | 925,614 | — | 934,963 | ||||||||||||
Net proceeds from the issuance of Partnership Units through Dividend Reinvestment Plan | 132 | 13,034 | — | 13,166 | ||||||||||||
Conversion of operating partnership units to common shares | — | 4,795 | — | 4,795 | ||||||||||||
Issuance of operating partnership units | 95 | (95 | ) | — | — | |||||||||||
Earned portion of non-vested stock | 72 | 7,144 | — | 7,216 | ||||||||||||
Stock option expense | 1 | 88 | — | 89 | ||||||||||||
Deferred compensation outside directors | 1 | 91 | — | 92 | ||||||||||||
Adjustment to redemption value of noncontrolling redeemable Operating Partnership Units | — | 4,457 | — | 4,457 | ||||||||||||
Net income attributable to common unitholders | 856 | 84,369 | — | 85,225 | ||||||||||||
Amortization of terminated hedge included in AOCI | 4 | (4 | ) | 458 | 458 | |||||||||||
Change in fair value of derivatives | (75 | ) | 75 | (7,518 | ) | (7,518 | ) | |||||||||
Dividends | (1,575 | ) | (155,189 | ) | — | (156,764 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Balance December 31, 2016 | $ | 21,065 | $ | 2,088,904 | $ | (21,475 | ) | $ | 2,088,494 | |||||||
|
|
|
|
|
|
|
|
See notes to consolidated financial statements
LIFE STORAGE LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, | ||||||||||||
(dollars in thousands) | 2016 | 2015 | 2014 | |||||||||
Operating Activities | ||||||||||||
Net income | $ | 84,956 | $ | 113,077 | $ | 89,057 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 117,081 | 58,506 | 51,749 | |||||||||
Amortization of debt issuance costs and bond discount | 9,688 | 1,184 | 942 | |||||||||
(Gain) loss on sale of storage facilities | (15,270 | ) | 494 | (5,176 | ) | |||||||
Gain on sale of real estate | (623 | ) | — | — | ||||||||
Write-off of acquired property deposits | 1,783 | — | — | |||||||||
Equity in income of joint ventures | (3,665 | ) | (3,405 | ) | (2,086 | ) | ||||||
Distributions from unconsolidated joint venture | 5,207 | 4,821 | 3,123 | |||||||||
Non-vested stock earned | 7,308 | 6,313 | 4,677 | |||||||||
Stock option expense | 89 | 210 | 223 | |||||||||
Changes in assets and liabilities (excluding the effects of acquisitions): | ||||||||||||
Accounts receivable | 4,814 | (1,038 | ) | (606 | ) | |||||||
Prepaid expenses | (230 | ) | 1,132 | (457 | ) | |||||||
(Advances to) receipts from joint ventures | (294 | ) | (346 | ) | 590 | |||||||
Accounts payable and other liabilities | 18,494 | 5,847 | 5,187 | |||||||||
Deferred revenue | (3,788 | ) | (597 | ) | (1,155 | ) | ||||||
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Net cash provided by operating activities | 225,550 | 186,198 | 146,068 | |||||||||
Investing Activities | ||||||||||||
Acquisition of storage facilities, net of cash acquired | (1,750,267 | ) | (280,010 | ) | (281,731 | ) | ||||||
Improvements, equipment additions, and construction in progress | (72,852 | ) | (41,739 | ) | (35,097 | ) | ||||||
Net proceeds from the sale of storage facilities | 34,074 | 4,646 | 11,191 | |||||||||
Net proceeds from the sale of real estate | 623 | — | — | |||||||||
Investment in unconsolidated joint ventures | (6,438 | ) | (6,151 | ) | (28,650 | ) | ||||||
Property deposits | (1,209 | ) | (5,435 | ) | (706 | ) | ||||||
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Net cash used in investing activities | (1,796,069 | ) | (328,689 | ) | (334,993 | ) | ||||||
Financing Activities | ||||||||||||
Net proceeds from sale of partnership units | 948,129 | 225,701 | 112,676 | |||||||||
Proceeds from line of credit | 1,102,000 | 330,000 | 202,000 | |||||||||
Repayment of line of credit | (928,000 | ) | (300,000 | ) | (202,000 | ) | ||||||
Proceeds from term notes, net of discount | 796,682 | — | 175,000 | |||||||||
Repayment of term note | (150,000 | ) | — | — | ||||||||
Debt issuance costs | (15,273 | ) | — | (3,001 | ) | |||||||
Settlement of forward starting interest rate swaps | (9,166 | ) | — | — | ||||||||
Distributions to unitholders | (156,249 | ) | (113,039 | ) | (90,035 | ) | ||||||
Distributions to noncontrolling interest holders | (742 | ) | (555 | ) | (541 | ) | ||||||
Redemption of operating partnership units | — | (1,005 | ) | (6,028 | ) | |||||||
Mortgage principal payments | (197 | ) | (134 | ) | (127 | ) | ||||||
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Net cash provided by financing activities | 1,587,184 | 140,968 | 187,944 | |||||||||
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Net increase (decrease) in cash | 16,665 | (1,523 | ) | (981 | ) | |||||||
Cash at beginning of period | 7,020 | 8,543 | 9,524 | |||||||||
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Cash at end of period | $ | 23,685 | $ | 7,020 | $ | 8,543 | ||||||
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Supplemental cash flow information | ||||||||||||
Cash paid for interest, net of interest capitalized | $ | 39,856 | $ | 35,926 | $ | 31,764 | ||||||
Cash paid for income taxes, net of refunds | $ | 981 | $ | 1,084 | $ | 665 |
See notes to consolidated financial statements.
LIFE STORAGE, INC. - AND LIFE STORAGE LP
DECEMBER 31, 20142016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
SovranEffective August 15, 2016, the Parent Company changed its name from “Sovran Self Storage, Inc. (the “Company,” “We,to “Life Storage, Inc.” “Our,and the Operating Partnership changed its name from “Sovran Acquisition Limited Partnership” to “Life Storage LP”. Also, consistent with these name changes, and in connection with the rebranding of our storage facilities from “Uncle Bob’s Self Storage®” or “Sovran”)to “Life Storage®”, the name of the general partner of the Operating Partnership has been changed from “Sovran Holdings, Inc.” to “Life Storage Holdings, Inc.” and the name of the Parent Company’s taxable REIT subsidiary changed from “Uncle Bob’s Management, LLC” to “Life Storage Solutions, LLC”.
The Parent Company, which operates as a self-administered and self-managed real estate investment trust (a “REIT”), was formed on April 19, 1995 to own and operate self-storage facilities throughout the United States. On June 26, 1995, the Parent Company commenced operations effective with the completion of its initial public offering. The Parent Company, the Operating Partnership and their consolidated subsidiaries are collectively referred to in this report as the “Company.” In addition, terms such as “we,” “us,” or “our” used in this report may refer to the Company, the Parent Company and/or the Operating Partnership.
At December 31, 2014,2016, we had an ownership interest in, leased, and/or managed 518659 self-storage properties in 2529 states under the namenames Life Storage® and Uncle Bob’s Self Storage ®.®. Among our 518659 self-storage properties are 39 properties that we manage for an unconsolidated joint venture (Sovran HHF Storage Holdings LLC) of which we are a 20% owner, 30 properties that we manage for an unconsolidated joint venture (Sovran HHF Storage Holdings II LLC) of which we are a 15% owner, 17and 26 properties that we manage and have no ownership interest, and four properties that we lease.interest. Approximately 39%38% of the Company’s revenue is derived from stores in the states of Texas and Florida.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: All of the Company’s assets are owned by, and all its operations are conducted through Sovran Acquisition Limited Partnership (the “Operating Partnership”). Sovranthe Operating Partnership. Life Storage Holdings, Inc., a wholly-owned subsidiary of the Parent Company (the “Subsidiary”(“Holdings”), is the sole general partner of the Operating Partnership; the Parent Company is a limited partner of the Operating Partnership, and through its ownership of the SubsidiaryHoldings and its limited partnership interest controls the operations of the Operating Partnership, holding a 99.5% ownership interest therein as of December 31, 2014.2016. The remaining ownership interests in the Operating Partnership (the “Units”) are held by certain former owners of assets acquired by the Operating Partnership subsequent to its formation.Partnership.
We consolidate all wholly owned subsidiaries. Partially owned subsidiaries and joint ventures are consolidated when we control the entity. Our consolidated financial statements include the accounts of the Parent Company, the Operating Partnership, Uncle Bob’s Management, LLC (the Company’s taxable REIT subsidiary), Locke Sovran I, LLC (a wholly-owned subsidiary), and Locke Sovran II, LLC (a wholly-owned subsidiary).Life Storage Solutions, LLC. All intercompany transactions and balances have been eliminated. Investments in joint ventures that we do not control but for which we have significant influence over are accounted for using the equity method.
On June 30, 2011, the Company entered into a newly formed joint venture agreement with an owner of a self-storage facility in New Jersey (West Deptford JV LLC). As part of the agreement the Company contributed $4.2 million to the joint venture for a $2.8 million mortgage note at 8%, a 20% common interest, and a $1.4 million preferred interest with an 8% preferred return. The Company had concluded that this joint venture is a variable interest entity pursuant to the guidance in FASB ASC Topic 810, “Consolidation” on the basis that the total equity investmentIncluded in the joint venture is not sufficient to permit the joint venture to finance its activities without additional subordinated financial support from its investors. On February 5, 2013 the Company entered into a Membership Interest Purchase Agreement to sell its common and preferred interests in West Deptford JV LLC to the other joint venture partner for approximately $1.4 million, resulting in a gain of $0.4 million. Simultaneous with this transaction the joint venture partner also repaid the $2.8 million mortgage note held by the Company. As a result of these transactions the Company no longer holds any ownership interest in this joint venture. The results of operations of this joint venture are included in our consolidated financial statements through the February 5, 2013 date of divesture.
Included in theParent Company’s consolidated balance sheets are noncontrolling redeemable operating partnership units.units and included in the Operating Partnership’s consolidated balance sheets are limited partners’ redeemable capital interest at redemption value. These interests are presented in the “mezzanine” section of the consolidated balance sheetsheets because they do not meet the functional definition of a liability or equity under current accounting literature. These represent the outside ownership interests of the limited partners in the Operating Partnership. At December 31, 2014,2016, there were 155,484217,481 noncontrolling redeemable operating partnership Units outstanding (198,913(168,866 at December 31, 2013)2015). These unitholders are entitled to receive distributions per unit equivalent to the dividends declared per share on the
Parent Company’s common stock. The Operating Partnership is obligated to redeem each of these limited partnership Units in the Operating Partnership at the request of the holder thereof for cash equal to the fair market value of a share of the Company’s common stock, at the time of such redemption, provided that the Company at its option may elect to acquire any such Unit presented for redemption for one common share or cash. The Company accounts for these noncontrolling redeemable Operating Partnership
Units under the provisions of EITF D-98, “Classification and Measurement of Redeemable Securities” which was codified in FASB ASC Topic480-10-S99. The application of the FASB ASC Topic 480-10-S99 accounting model requires the noncontrolling interest to follow normal noncontrolling interest accounting and then be marked to redemption value at the end of each reporting period if higher (but never adjusted below that normal noncontrolling interest accounting amount). The offset to the adjustment to the carrying amount of the noncontrolling redeemable Operating Partnership Units is reflected in the Parent Company’s dividends in excess of net income.income and in the Operating Partnership’s general partner and limited partners capital balances. Accordingly, in the accompanying consolidated balance sheet,sheets, noncontrolling redeemable Operating Partnership Unitsinterests are reflected at redemption value at December 31, 20142016 and 2013,2015, equal to the number of Unitsnoncontrolling interest units outstanding multiplied by the fair market value of the Parent Company’s common stock at that date. Redemption value exceeded the value determined under the Company’s historical basis of accounting at those dates.
The following is a reconciliation of the Parent Company’s noncontrolling redeemable Operating Partnership Units:
(Dollars in thousands) | 2014 | 2013 | ||||||
Beginning balance noncontrolling redeemable Operating Partnership Units | $ | 12,940 | $ | 12,670 | ||||
Redemption of Operating Partnership Units | (6,028 | ) | (322 | ) | ||||
Redemption value in excess of carrying value | 570 | 1 | ||||||
Issuance of Operating Partnership Units | 2,417 | — | ||||||
Net income attributable to noncontrolling interests – consolidated joint venture | 526 | 469 | ||||||
Distributions | (541 | ) | (402 | ) | ||||
Adjustment to redemption value | 3,738 | 524 | ||||||
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Ending balance noncontrolling redeemable Operating Partnership Units | $ | 13,622 | $ | 12,940 | ||||
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(Dollars in thousands) | 2016 | 2015 | ||||||
Beginning balance noncontrolling redeemable Operating Partnership Units | $ | 18,171 | $ | 13,622 | ||||
Redemption of Operating Partnership Units | (4,795 | ) | (1,005 | ) | ||||
Redemption value in excess of carrying value | — | 80 | ||||||
Issuance of Operating Partnership Units | 9,516 | 2,148 | ||||||
Net income attributable to noncontrolling interests in Operating Partnership | 398 | 553 | ||||||
Distributions | (742 | ) | (555 | ) | ||||
Adjustment to redemption value | (4,457 | ) | 3,328 | |||||
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Ending balance noncontrolling redeemable Operating Partnership Units | $ | 18,091 | $ | 18,171 | ||||
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The following is a reconciliation of the Operating Partnership’s limited partners’ redeemable capital interest:
(Dollars in thousands) | 2016 | 2015 | ||||||
Beginning balance Limited Partners’ Redeemable Capital Interest | $ | 18,171 | $ | 13,622 | ||||
Redemption of Limited Partners’ Redeemable Capital Interest Units | (4,795 | ) | (1,005 | ) | ||||
Redemption value in excess of carrying value | — | 80 | ||||||
Issuance of Limited Partners’ Redeemable Capital Interest Units | 9,516 | 2,148 | ||||||
Net income attributable to Limited Partners’ Redeemable Capital Interest | 398 | 553 | ||||||
Distributions | (742 | ) | (555 | ) | ||||
Adjustment to redemption value | (4,457 | ) | 3,328 | |||||
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Ending balance Limited Partners’ Redeemable Capital Interest | $ | 18,091 | $ | 18,171 | ||||
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In 20142016 the CompanyOperating Partnership issued 28,48190,477 Units with a fair value of $2.4$9.5 million to acquire self-storage properties. In 2015 the Company issued 23,382 Units with a fair value of $2.1 million to acquire one self-storage property. The fair value of the Units on the datedates of issuance was determined based upon the fair market value of the Company’s common stock on that date.those dates.
Operating Partnership Units redeemed in 2016 were redeemed for a total of 41,862 shares of the Parent Company.
Cash and Cash Equivalents: The Company considers all highly liquid investments purchased with maturities of three months or less to be cash equivalents. Cash and cash equivalents include $6,000 and $34,000 held in escrow for an encumbered property at December 31, 2014 and 2013, respectively.
Accounts Receivable: Accounts receivable are composed of trade and other receivables recorded at billed amounts and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable uncollectible amounts in the Company’s existing accounts receivable. The Company determines the allowance based on a number of factors, including experience, credit worthiness of customers, and current market and economic conditions. The Company reviews the allowance for doubtful accounts on a regular basis. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The allowance for doubtful accounts is recorded as a reduction of accounts receivable and amounted to $0.5 million, $0.4$1.0 million and $0.4 million at December 31, 2014, 20132016 and 2012,2015, respectively.
Revenue and Expense Recognition: Rental income is recognized when earned pursuant to month-to-month leases for storage space. Promotional discounts are recognized as a reduction to rental income over the promotional period, which is generally during the first month of occupancy. Rental income received prior to the start of the rental period is included in deferred revenue. Equity in earnings of real estate joint ventures that we have significant influence over is recognized based on our ownership interest in the earnings of these entities.
Cost of operations, general and administrative expense, interest expense and advertising costs are expensed as incurred. For the years ended December 31, 2014, 2013,2016, 2015, and 2012,2014, advertising costs were $6.2$9.5 million, $5.4$7.3 million, and $4.6$6.2 million, respectively. The Company accrues property taxes based on estimates and historical trends. If these estimates are incorrect, the timing and amount of expense recognition would be affected.
Other Operating Income: Consists primarily of sales of storage-related merchandise (locks and packing supplies), insurance commissions,administrative fees, incidental truck rentals, and management and acquisition fees from unconsolidated joint ventures.
Investment in Storage Facilities: Storage facilities are recorded at cost. The purchase price of acquired facilities is allocated to land, land improvements, building, equipment, and in-place customer leases based on the fair value of each component. The fair values of land are determined based upon comparable market sales information. The fair values of buildings are determined based upon estimates of current replacement costs adjusted for depreciation on the properties. For the years ended December 31, 2016, 2015, and 2014, 2013, and 2012, $7.4$29.5 million, $3.1$3.0 million, and $4.3$7.4 million of acquisition related costs were incurred and expensed, respectively.
Depreciation is computed using the straight-line method over estimated useful lives of forty years for buildings and improvements, and five to twenty years for furniture, fixtures and equipment. Estimated useful lives are reevaluated when facts and circumstances indicate that the economic lives of assets do not extend to their currently assigned useful lives. Expenditures for significant renovations or improvements that extend the useful life of assets are capitalized. Depreciation expense was $87.2 million, $55.1 million and $47.7 million for the years ending December 31 206, 2015 and 2014, respectively. Interest and other costs incurred during the construction period of major expansions are capitalized. Capitalized interest during the years ended December 31, 2014, 2013,2016, 2015, and 20122014 was $0.1 million $0.1 million and $0.1 million, respectively.annually. Repair and maintenance costs are expensed as incurred.
Whenever events or changes in circumstances indicate that the basis of the Company’s property may not be recoverable, the Company’s policy is to complete an assessment of impairment. Impairment is evaluated based upon comparing the sum of the property’s expected undiscounted future cash flows to the carrying value of the property. If the sum of the undiscounted cash flowflows is less than the carrying amount of the property, an impairment loss is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. For the years ended December 31, 2014, 20132016, 2015 and 2012,2014, no assets hadhave been determined to be impaired under this policy.
In general, sales of real estate and related profits / losses are recognized when all consideration has changed hands and risks and rewards of ownership have been transferred.
Trade Name: The Company’s trade name has an indefinite life and is not amortized but is reviewed for impairment annually or more frequently when facts and circumstances indicate that the carrying value of the Company’s trade name may not be recoverable. We may elect to perform a qualitative assessment that considers economic, industry and company-specific factors as part of our annual test. If, after completing this assessment, it is determined that it is more likely than not that the fair value of the trade name is less than its carrying value, we proceed to a quantitative test. We did not elect to perform a qualitative assessment in 2016.
Quantitative testing requires a comparison of the fair value of the trade name to its carrying value. We use a discounted cash flow analysis under the relief-from-royalty method to estimate the fair value of the trade name. This method incorporates various assumptions, including projected revenue growth rates, the terminal growth rate, the royalty rate to be applied, and the discount rate utilized. If the carrying value exceeds the fair value, the trade name is considered impaired to the extent that the carrying value exceeds the fair value. We did not record any impairment in 2016, the year in which the trade name was acquired.
Other Assets: Included in other assets are net deferred financing costs,cash balances held in escrow for encumbered properties, property deposits and the value placed on in-place customer leases at the time of acquisition. The gross deferred financing costs were $8.2 million and $6.3 millionCash held in escrow for encumbered properties at December 31, 2014,2016 and 2013,2015, totaled $238,000 and $12,000, respectively. Accumulated amortization on gross deferred financing costs was approximately $1.9 million and $2.0 million at December 31, 2014, and 2013, respectively. Deferred financing costs are amortized over the terms of the related debt. Property deposits at December 31, 20142016 and 20132015 were $0.8$2.4 million and $5.6$5.9 million, respectively. In 2016, a decision was made to not proceed with the acquisition of two properties on which the Company had previously made property deposits totaling $1.8 million. As a result, these property deposits were abandoned and are included in write-off of acquired property deposits on the accompanying consolidated statements of operations. No such expenses were incurred in 2015 or 2014.
The Company allocates a portion of the purchase price of acquisitions to in-place customer leases. The methodology used to determine the fair value of in-place customer leases is disclosed in Note 9.8. The Company amortizes in-place customer leases on a straight-line basis over 12 months (the estimated future benefit period).
Amortization expense related to deferred financing costs was $0.9 million, $0.8 million and $0.8 million for the periods ended December 31, 2014, 2013 and 2012, respectively, and is included in interest expense in the consolidated statement of operations.
Investment in Unconsolidated Joint Ventures: The Company’s investment in unconsolidated joint ventures, where the Company has significant influence, but not control and joint ventures which are VIEsvariable interest entities in which the Company is not the primary beneficiary, are recorded under the equity method of accounting in the accompanying consolidated financial statements. Under the equity method, the Company’s investment in unconsolidated joint ventures is stated at cost and adjusted for the Company’s share of net earnings or losses and reduced by distributions. Equity in earnings of unconsolidated joint ventures is generally recognized based on the Company’s ownership interest in the earnings of each of the unconsolidated joint ventures. For the purposes of presentation in the statement of cash flows, the Company follows the “look through” approach for classification of distributions from joint ventures. Under this approach, distributions are reported under operating cash flow unless
the facts and circumstances of a specific distribution clearly indicate that it is a return of capital (e.g., a liquidating dividend or distribution of the proceeds from the joint venture’s sale of assets), in which case it is reported as an investing activity.
Accounts Payable and Accrued Liabilities: Accounts payable and accrued liabilities consists primarily of trade payables, accrued interest, and property tax accruals. The Company accrues property tax expense based on estimates and historical trends. Actual expense could differ from these estimates.
Income Taxes: The Company qualifies as a REIT under the Internal Revenue Code of 1986, as amended, and will generally not be subject to corporate income taxes to the extent it distributes its taxable income to its shareholders and complies with certain other requirements.
The Company has elected to treat one of its subsidiaries as a taxable REIT subsidiary. In general, the Company’s taxable REIT subsidiary may perform additional services for tenants and generally may engage in certain real estate or non-real estate related business. A taxable REIT subsidiary is subject to corporate federal and state income taxes. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities.
For the years ended December 31, 2014, 20132016, 2015 and 2012,2014, the Company recorded federal and state income tax expense of $0.9$0.4 million, $0.9$1.3 million, and $1.3$0.9 million, respectively. The 20142016 income tax expense includes current expense of $0.5$0.1 million and deferred tax expense of $0.4$0.3 million. At December 31, 20142016 and 2013,2015, there were no material unrecognized tax benefits. Interest and penalties relating to uncertain tax positions will be recognized in income tax expense when incurred. As of December 31, 20142016 and 2013,2015, the Company had no interest or penalties related to uncertain tax provisions. Net income taxes payable and the net deferred tax liability of our taxable REIT subsidiary are classified within accounts payable and accrued liabilities and prepaid taxes are classified within prepaid expenses in the consolidated balance sheet.sheets. As of December 31, 2014,2016, the Company’s taxable REIT subsidiary has current prepaid taxes of $0.5$0.4 million, deferred tax assets of $1.5 million and a deferred tax liability of $1.3$2.2 million. As of December 31, 2013,2015, the Company’s taxable REIT subsidiary had current prepaid taxes of $0.3$0.2 million and a deferred tax liability of $0.9$1.2 million.
Derivative Financial Instruments: The Company accounts for derivatives in accordance with ASC Topic 815 “Derivatives and Hedging”, which requires companies to carry all derivatives on the balance sheet at fair value. The Company determines the fair value of derivatives using an income approach. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, the reason for holding it. The Company’s use of derivative instruments is limited to cash flow hedges of certain interest rate risks.
Recent Accounting Pronouncements: In July 2013, the FASB issued ASU 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” This ASU provides explicit guidance regarding the presentation in the statement of financial position of an unrecognized tax benefit when net operating losses or tax credit carryforwards exist. It is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, with early adoption permitted, and is applicable to the Company’s fiscal year beginning January 1, 2014. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In AprilMay 2014, the FASB issued ASU 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and disclosures of Components of an Entity”. Under this ASU, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results. The ASU also requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. It is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014, with early adoption permitted. The Company adopted this guidance effective January 1, 2014 and the adoption is expected to significantly reduce the classification of property sales by the Company as discontinued operations.
During 2014 the Company sold two properties with a carrying value of $5.8 million and received cash proceeds of $11.0 million, resulting in a $5.2 million gain on sale. The following table summarizes the revenues and expenses up to the date of sale of the two properties sold in 2014 that are included in the Company’s consolidated statements of operations for 2014, 2013 and 2012.
(dollars in thousands) | 2014 | 2013 | 2012 | |||||||||
Total revenues | $ | 1,268 | $ | 1,480 | $ | 1,333 | ||||||
Property operations and maintenance expense | (259 | ) | (362 | ) | (367 | ) | ||||||
Real estate tax expense | (158 | ) | (187 | ) | (157 | ) | ||||||
Depreciation and amortization expense | (137 | ) | (179 | ) | (175 | ) | ||||||
Gain on sale of storage facilities | 5,176 | — | — | |||||||||
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$ | 5,890 | $ | 752 | $ | 634 | |||||||
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In May 2014, FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires an entity to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016.2017. The Company has the option to apply the provisions of ASU 2014-09 either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the new guidance recognized at the date of initial application. The Company has not yet completed its assessmentWe are currently evaluating the alternative methods of adoption and the impact thateffect of adopting ASU 2014-09 on our financial statements and related disclosures. We are also in the process of assessing which of our operating revenue streams will be impacted by the adoption of the new standard. Leases are specifically excluded from the scope of ASU 2014-09, therefore the Company does not anticipate that adoption of the new standard will have any impact on its consolidated financial statements.the timing or amounts of the Company’s rental revenue from customers which is a substantial portion of the Company’s total operating revenues. The Company intends to make a decision on which method of adoption will be elected by the end of the second quarter of 2017.
In June 2014, the FASB issued ASU 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period,” which requires a reporting entity to treat a performance target that affects vesting and that could be achieved after the requisite service period as a performance condition. ASU 2014-12 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted. ASU 2014-12 may be adopted either prospectively for share-based payment awards granted or modified on or after the effective date, or retrospectively, using a modified retrospective approach. The modified retrospective approach would apply to share-based payment awards outstanding as of the beginning of the earliest annual period presented in the financial statements on adoption, and to all new or modified awards thereafter. The Company does not expect the adoption of ASU 2014-12 toby the Company did not have a material impact on its consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 310-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” which is effective for annual periods ending after December 15, 2016 and annual and interim periods thereafter. This ASU requires management to make an assessment for each annual and interim reporting period as to whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued or available to be issued. If management identifies conditions or events that raise substantial doubt about about the Company’s ability to continue as a going concern, certain additional considerations and disclosures are required to be made. The adoption of ASU 2014-15 by the Company did not have a material impact on its consolidated financial statements.
In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis”. This ASU is effective for annual reporting periods beginning after December 15, 2015 including interim periods within that reporting period. ASU 2015-02 amends the current consolidation model specifically as it relates to variable interest entities (“VIE’s”) and provides reporting entities with a revised consolidation analysis procedure. The adoption of ASU 2015-02 by the Company did not have a material impact on its consolidated financial statements.
During April 2015, the FASB issued ASU No. 2015-03, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”, which amends the requirements for the presentation of debt issuance costs and requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU No. 2015-03 is effective for fiscal years, beginning after December 15, 2015 and interim periods within those fiscal years, with retrospective application required. Consistent with the guidance in ASU No. 2015-03 there are $3.4 million of debt issuance costs that have been presented as a reduction of term notes in our accompanying consolidated balance sheets at December 31, 2015 that were previously classified in other assets prior to the adoption of ASU No. 2015-03. The implementation of this accounting standards update had no effect on our results of operations or cash flows.
In August 2015, the FASB issued Accounting Standards Update 2015-15, “Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements” (“ASU 2015-15”). ASU 2015-15 codifies an SEC staff announcement that entities are permitted to defer and present debt issuance costs related to line-of-credit arrangements as assets. ASU No. 2015-15 is effective for fiscal years, beginning after December 15, 2015 and interim periods within those fiscal years. The implementation of this update did not result in any changes to our consolidated financial statements.
In September 2015, the FASB issued ASU 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments”. ASU 2015-16 requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. ASU 2015-16 is effective for fiscal years, and interim reporting periods within those fiscal years, beginning after December 15, 2015. The adoption of ASU 2015-16 by the Company did not have a material impact on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. This guidance revises existing practice related to accounting for leases under Accounting Standards Codification Topic 840Leases(ASC 840) for both lessees and lessors. The new guidance in ASU 2016-02 requires lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The lease liability will be equal to the present value of lease payments and the right-of-use asset will be based on the lease liability, subject to adjustment such as for initial direct costs. For income statement purposes, the new standard retains a dual model similar to ASC 840, requiring leases to be classified as either operating or finance. For lessees, operating leases will result in straight-line expense (similar to current accounting by lessees for operating leases under ASC 840) while finance leases will result in a front-loaded expense pattern (similar to current accounting by lessees for capital leases under ASC 840). While the new standard maintains similar accounting for lessors as under ASC 840, the new standard reflects updates to, among other things, align with certain changes to the lessee model. ASU 2016-02 is effective for fiscal years and interim periods, within those years, beginning after December 15, 2018. Early adoption is permitted for all entities. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting the new leases standard on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-06, “Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments”. ASU 2016-06 simplifies the embedded derivative analysis for debt instruments containing contingent call or put options by removing the requirement to assess whether a contingent event is related to interest rates or credit risks. The new standard will be effective for us on January 1, 2017. The Company has determined that the adoption of ASU 2016-06 will not have a material impact on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-07, “Investments—Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting”. ASU 2016-07 eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an adjustment must be made to the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The new standard will be effective for us on January 1, 2017. The Company has determined that the adoption of ASU 2016-07 will not have a material impact on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting” as part of its simplification initiative, which involves several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company has determined that the adoption of ASU 2016-09 will not have a material impact on its consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a Consensus of the Emerging Issues Task Force)” in an effort to reduce existing diversity in practice related to the classification of certain cash receipts and cash payments on the statements of cash flows. The guidance addresses the classification of cash flows related to, among other things, distributions received from equity method investees. The amendments in this update are effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. The Company has not yet completed its assessment of the impact that the adoption of ASU 2016-15 will have on its consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a Consensus of the Emerging Issues Task Force)” which requires restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this update are effective for annual periods beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption of this update is permitted. Other than modifications to the statement of cash flows, the adoption of ASU 2016-18 is not expected to have a material impact on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” which is intended to assist entities with evaluating whether a set of transferred assets and activities is a business. The amendments in this update are effective for annual periods beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption of this update is permitted. The adoption of ASU 2017-01 is expected to have potential impact on the accounting treatment of properties acquired subsequent to the adoption date. Property acquisitions treated as business combinations under current guidance may no longer be treated as business combinations subsequent to the adoption of ASU 2017-01. We are in the process of evaluating whether the properties we acquire will meet the definition of a “business” under ASU 2017-01. To the extent they do not meet such definition, future acquisitions of properties may be accounted for as asset acquisitions resulting in the capitalization of acquisition costs incurred in connection with these transactions and the allocation of the purchase price and related acquisition costs to the assets acquired based on their relative fair values.
Stock-Based Compensation: The Company accounts for stock-based compensation under the provisions of ASC Topic 718, “Compensation - Stock Compensation”. The Company recognizes compensation cost in its financial statements for all share based payments granted, modified, or settled during the period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the related vesting period.
The Company recorded compensation expense (included in general and administrative expense) of $89,000, $210,000, and $223,000, $301,000 and $280,000respectively, related to stock options and $7.2 million, $6.3 million, and $4.6 million, $2.9 million and $2.4 millionrespectively, related to amortization of non-vested stock grants for the years ended December 31, 2014, 20132016, 2015 and 2012, respectively.2014. The Company uses the Black-Scholes Merton option pricing model to estimate the fair value of stock options granted subsequent to the adoption of ASC Topic 718. The application of this pricing model involves assumptions that are judgmental and sensitive in the determination of compensation expense. The weighted average for key assumptions used in determining the fair value of options granted during 2014 follows:
Weighted Average | Range | |||||
Expected life (years) | 4.50 | 4.50 | ||||
Risk free interest rate | 1.63 | % | 1.57% - 1.71% | |||
Expected volatility | 22.77 | % | 22.60% - 22.90% | |||
Expected dividend yield | 3.58 | % | 3.58% | |||
Fair value | $ | 10.04 | $10.02 - $10.06 |
The weighted-average fair value of options granted during the years ended December 31, 20132015 and 2012,2014, were $13.95$9.90 and $12.40,$10.04, respectively. There were no options granted during the year ended December 31, 2016.
To determine expected volatility, the Company uses historical volatility based on daily closing prices of its Common Stock over periods that correlate with the expected terms of the options granted. The risk-free rate is based on the United States Treasury yield curve at the time of grant for the expected life of the options granted. Expected dividends are based on the Company’s history and expectation of dividend payouts. The expected life of stock options is based on the midpoint between the vesting date and the end of the contractual term.
During 20142016, 2015 and 2013,2014, the Company issued performance based non-vested stock awards to certain executives. The fair value for the performance based non-vested shares grantedawards in 20142016, 2015 and 20132014 was estimated at the time the sharesawards were granted using a Monte Carlo pricing model applying the following assumptions:
2014 | 2013 | 2016 | 2015 | 2014 | ||||||||||||||||
Expected life (years) | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | |||||||||||||||
Risk free interest rate | 1.18 | % | 0.64 | % | 1.53 | % | 1.33 | % | 1.18 | % | ||||||||||
Expected volatility | 18.42 | % | 24.78 | % | 19.37 | % | 18.88 | % | 18.42 | % | ||||||||||
Fair value | $ | 46.95 | $ | 35.32 | $ | 80.24 | $ | 101.43 | $ | 46.95 |
The Monte Carlo pricing model was not used to value any other 2014, 20132016, 2015 and 20122014 non-vested shares granted as no market conditions were present in these awards. The value of these other non-vested shares was equal to the stock price on the date of grant.
Reclassification: As noted below, certain amounts in the 2014 financial statements have been reclassified to conform with the 2015 and 2016 presentation.
Internet advertising expense, which had been included in the general and administrative expense line in financial statements filed in 2014 and prior years, has been reclassified to property operations and maintenance expense to conform with the current presentation which we implemented in the first quarter of 2015. The Company believes the classification of internet advertising expenses as property operations and maintenance expense is more consistent with industry trends. The amount of internet advertising expense that was reclassified for the year ended December 31, 2014 was $5.6 million.
Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
3. EARNINGS PER SHARE AND EARNINGS PER UNIT
The Company reports earnings per share and earnings per unit data in accordance with ASC Topic 260, “Earnings Per Share.” Effective January 1, 2009, FASB ASC Topic 260 was updated for the issuance of FASB Staff Position (“FSP”) EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities”, or FSP EITF 03-6-1, with transition guidance included in FASB ASC Topic 260-10-65-2. Under FSP EITF 03-6-1, unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities and shall be included in the computation of earnings-per-share pursuant to the two-class method. The Parent Company hasand the Operating Partnership have calculated itstheir basic and diluted earnings per shareshare/unit using the two-class method.
The following table sets forth the computation of basic and diluted earnings per common share utilizing the two-class method.
Year Ended December 31, | ||||||||||||
(Amounts in thousands, except per share data) | 2016 | 2015 | 2014 | |||||||||
Numerator: | ||||||||||||
Net income attributable to common shareholders | $ | 85,225 | $ | 112,524 | $ | 88,531 | ||||||
Denominator: | ||||||||||||
Denominator for basic earnings per share - weighted average shares | 43,184 | 35,379 | 33,019 | |||||||||
Effect of Dilutive Securities: | ||||||||||||
Stock options and non-vested stock | 223 | 222 | 172 | |||||||||
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Denominator for diluted earnings per share - adjusted weighted average shares and assumed conversion | 43,407 | 35,601 | 33,191 | |||||||||
Basic Earnings per common share attributable to common shareholders | $ | 1.97 | $ | 3.18 | $ | 2.68 | ||||||
Diluted Earnings per common share attributable to common shareholders | $ | 1.96 | $ | 3.16 | $ | 2.67 |
(Amounts in thousands, except per share data) Numerator: Net income from continuing operations attributable to common shareholders Denominator: Denominator for basic earnings per share - weighted average shares Effect of Dilutive Securities: Stock options and non-vested stock Denominator for diluted earnings per share - adjusted weighted average shares and assumed conversion Basic Earnings per Common Share from continuing operations attributable to common shareholders Basic Earnings per Common Share attributable to common shareholders Diluted Earnings per Common Share from continuing operations attributable to common shareholders Diluted Earnings per Common Share attributable to common shareholders Year Ended December 31, 2014 2013 2012 $ 88,531 $ 71,023 $ 47,677 33,019 31,297 29,358 172 156 131 33,191 31,453 29,489 $ 2.68 $ 2.27 $ 1.62 $ 2.68 $ 2.37 $ 1.88 $ 2.67 $ 2.26 $ 1.61 $ 2.67 $ 2.36 $ 1.87
The following table sets forth the computation of basic and diluted earnings per common unit utilizing the two-class method.
Year Ended December 31, | ||||||||||||
(Amounts in thousands, except per unit data) | 2016 | 2015 | 2014 | |||||||||
Numerator: | ||||||||||||
Net income attributable to common unitholders | $ | 85,225 | $ | 112,524 | $ | 88,531 | ||||||
Denominator: | ||||||||||||
Denominator for basic earnings per unit - weighted average units | 43,184 | 35,379 | 33,019 | |||||||||
Effect of Dilutive Securities: | ||||||||||||
Stock options and non-vested stock | 223 | 222 | 172 | |||||||||
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Denominator for diluted earnings per share - adjusted weighted average units and assumed conversion | 43,407 | 35,601 | 33,191 | |||||||||
Basic Earnings per common unit attributable to common unitholders | $ | 1.97 | $ | 3.18 | $ | 2.68 | ||||||
Diluted Earnings per common unit attributable to common unitholders | $ | 1.96 | $ | 3.16 | $ | 2.67 |
Not included in the effect of dilutive securities above are 107,283 unvested restricted shares for the year ended December 31, 2016; and 5,500 stock options and 152,835 unvested restricted shares for the year ended December 31, 2015; and 5,000 stock options and 151,474 unvested restricted shares for the year ended December 31, 2014; and 2,000 stock options and 112,664 unvested restricted shares for the year ended December 31, 2013; and 31,375 stock options and 121,711 unvested restricted shares for the year ended December 31, 2012,2014, because their effect would be antidilutive.
4. INVESTMENT IN STORAGE FACILITIES
The following summarizes activity in storage facilities during the years ended December 31, 20142016 and December 31, 2013.2015.
(Dollars in thousands) | 2014 | 2013 | 2016 | 2015 | ||||||||||||
Cost: | ||||||||||||||||
Beginning balance | $ | 1,864,637 | $ | 1,742,354 | $ | 2,491,702 | $ | 2,177,983 | ||||||||
Acquisition of storage facilities | 286,691 | 93,376 | 1,714,029 | 278,572 | ||||||||||||
Improvements and equipment additions | 40,137 | 32,241 | 65,860 | 39,807 | ||||||||||||
Increase (decrease) in construction in progress | (5,040 | ) | 1,570 | |||||||||||||
Dispositions and impairments | (8,442 | ) | (4,904 | ) | ||||||||||||
Net increase in construction in progress | 7,525 | 2,239 | ||||||||||||||
Dispositions | (35,808 | ) | (6,899 | ) | ||||||||||||
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Ending balance | $ | 2,177,983 | $ | 1,864,637 | $ | 4,243,308 | $ | 2,491,702 | ||||||||
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Accumulated Depreciation: | ||||||||||||||||
Beginning balance | $ | 366,472 | $ | 324,963 | $ | 465,195 | $ | 411,701 | ||||||||
Additions during the year | 47,656 | 41,929 | 87,219 | 55,101 | ||||||||||||
Dispositions and impairments | (2,427 | ) | (420 | ) | ||||||||||||
Dispositions | (16,710 | ) | (1,607 | ) | ||||||||||||
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Ending balance | $ | 411,701 | $ | 366,472 | $ | 535,704 | $ | 465,195 | ||||||||
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On July 15, 2016, the Company acquired all of the outstanding partnership interests in LifeStorage, LP, a Delaware limited partnership (“LS”). Pursuant to the acquisition, the Company acquired 83 self-storage properties throughout the country, including the following markets: Chicago, Illinois; Las Vegas, Nevada; Sacramento, California; Austin, Texas; and Los Angeles, California. Pursuant to the terms of the Agreement and Plan of Merger dated as of May 18, 2016 by and among LS, the Operating Partnership, Solar Lunar Sub, LLC, a Delaware limited liability company and wholly-owned subsidiary of the Operating Partnership, and Fortis Advisors LLC, a Delaware limited liability company, as Sellers’ Representative, the Company paid aggregate consideration of approximately $1.3 billion, of which $482 million was paid to discharge existing indebtedness of LS (including prepayment penalties and defeasance costs totaling $15.5 million). The merger was funded with the existing cash that was generated primarily from the proceeds from the Company’s May 2016 common stock offering and the 2026 Senior Notes offering, and draws on the Company’s line of credit totaling $482 million.
Including the LS acquisition, the Company acquired 122 facilities during 2016. The acquisition of three stores that were acquired at certificate of occupancy were accounted for as asset acquisitions. The cost of these stores, including closing costs, was assigned to land, building, equipment and improvements components based upon their relative fair values. The assets and liabilities of the acquiredother 119 storage facilities acquired in 2016, which primarily consist of tangible and intangible assets, are measured at fair value on the date of acquisition in accordance with the principles of FASB ASC Topic 820, “Fair Value Measurements and Disclosures.”Disclosures” During 2014 and 2013,were accounted for as business combinations in accordance with the principles of FASB ASC Topic 805 “Business Combinations.”
The Company acquired 27 facilities during 2015. The four facilities acquired in Connecticut and New York on February 2, 2015 had been leased by the Company since November 1, 2013. The acquisitions of these four stores and three additional stores that were acquired 33at certificate of occupancy were accounted for as asset acquisitions. The cost of these seven stores, including closing costs, was assigned to their land, building, equipment and 11 self-storageimprovements components based upon their relative fair values. The assets and liabilities of the other 20 storage facilities respectively,acquired in 2015, which primarily consist of tangible and intangible assets, are measured at fair value on the date of acquisition in accordance with the principles of FASB ASC Topic 820, “Fair Value Measurements and Disclosures” and were accounted for as business combinations in accordance with the principles of FASB ASC Topic 805 “Business Combinations.”
The purchase price of the 122 facilities wasacquired in 2016 and the 27 facilities acquired in 2015 has been assigned as follows (as of December 31, 20142016 the purchase price assignments relating to the facilities acquired during the second half of 20142016 are preliminary):
Consideration paid | Acquisition Date Fair Value | |||||||||||||||||||||||||||||||||||||||
(dollars in thousands) State | Number of Properties | Date of Acquisition | Purchase Price | Cash Paid | Value of Operating Partnership Units Issued | Net Other Liabilities (Assets) Assumed | Land | Building, Equipment, and Improvements | In-Place Customer Leases | Closing Costs Expensed | ||||||||||||||||||||||||||||||
2014 | ||||||||||||||||||||||||||||||||||||||||
Florida | 2 | 1/9/2014 | $ | 54,000 | $ | 53,599 | $ | — | $ | 401 | $ | 23,309 | $ | 29,867 | $ | 824 | $ | 1,674 | ||||||||||||||||||||||
Texas | 1 | 1/17/2014 | 9,000 | 8,962 | — | 38 | 3,999 | 4,856 | 145 | 216 | ||||||||||||||||||||||||||||||
Texas | 1 | 2/10/2014 | 8,900 | 8,857 | — | 43 | 2,235 | 6,564 | 101 | 204 | ||||||||||||||||||||||||||||||
Maine | 2 | 2/11/2014 | 14,750 | 14,602 | — | 148 | 2,639 | 11,824 | 287 | 409 | ||||||||||||||||||||||||||||||
Illinois | 1 | 3/31/2014 | 8,700 | 8,582 | — | 118 | 1,837 | 6,724 | 139 | 224 | ||||||||||||||||||||||||||||||
Illinois | 1 | 5/5/2014 | 5,500 | 5,487 | — | 13 | 598 | 4,902 | — | 45 | ||||||||||||||||||||||||||||||
Texas | 1 | 5/13/2014 | 6,075 | 6,017 | — | 58 | 2,000 | 3,935 | 140 | 181 | ||||||||||||||||||||||||||||||
Missouri | 7 | 5/22/2014 | 35,050 | 34,786 | — | 264 | 9,420 | 24,835 | 795 | 622 | ||||||||||||||||||||||||||||||
New Jersey | 1 | 6/5/2014 | 12,600 | 12,526 | — | 74 | 5,161 | 7,201 | 238 | 281 | ||||||||||||||||||||||||||||||
New York | 1 | 6/11/2014 | 8,000 | 7,988 | — | 12 | 1,741 | 6,106 | 153 | 202 | ||||||||||||||||||||||||||||||
New Jersey | 1 | 6/12/2014 | 2,500 | 2,431 | — | 69 | — | 2,319 | 181 | 64 | ||||||||||||||||||||||||||||||
Georgia | 1 | 6/12/2014 | 7,700 | 7,616 | — | 84 | 2,263 | 5,293 | 144 | 179 | ||||||||||||||||||||||||||||||
New Jersey | 3 | 6/18/2014 | 18,325 | 18,221 | — | 104 | 2,543 | 15,377 | 405 | 542 | ||||||||||||||||||||||||||||||
New Jersey | 1 | 7/10/2014 | 11,590 | 11,572 | — | 18 | 1,512 | 9,880 | 198 | 321 | ||||||||||||||||||||||||||||||
Florida | 1 | 8/28/2014 | 10,200 | 10,111 | — | 89 | 2,958 | 7,055 | 187 | 184 | ||||||||||||||||||||||||||||||
Virginia | 1 | 9/5/2014 | 6,400 | 6,373 | — | 27 | 2,349 | 3,947 | 104 | 267 | ||||||||||||||||||||||||||||||
Texas | 1 | 9/10/2014 | 11,200 | 11,046 | — | 154 | 2,658 | 8,299 | 243 | 196 | ||||||||||||||||||||||||||||||
Tennessee | 1 | 9/18/2014 | 6,550 | 6,535 | — | 15 | 759 | 5,749 | 42 | 144 | ||||||||||||||||||||||||||||||
Louisiana | 1 | 10/10/2014 | 16,750 | 16,630 | — | 120 | 5,771 | 10,697 | 282 | 238 | ||||||||||||||||||||||||||||||
Florida | 1 | 10/20/2014 | 11,250 | 11,119 | — | 131 | 6,091 | 4,971 | 188 | 495 | ||||||||||||||||||||||||||||||
Texas | 1 | 10/28/2014 | 13,125 | 13,095 | — | 30 | 4,196 | 8,721 | 208 | 267 | ||||||||||||||||||||||||||||||
Illinois | 1 | 11/14/2014 | 5,750 | 3,239 | 2,417 | 94 | 889 | 4,850 | 11 | 206 | ||||||||||||||||||||||||||||||
Texas | 1 | 12/18/2014 | 8,000 | 7,937 | — | 63 | 1,598 | 6,193 | 209 | 197 | ||||||||||||||||||||||||||||||
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Total acquired 2014 | 33 | $ | 291,915 | $ | 287,331 | $ | 2,417 | $ | 2,167 | $ | 86,526 | $ | 200,165 | $ | 5,224 | $ | 7,358 | |||||||||||||||||||||||
2013 | ||||||||||||||||||||||||||||||||||||||||
Texas | 1 | 2/11/2013 | $ | 2,400 | $ | 2,382 | $ | — | $ | 18 | $ | 337 | $ | 2,005 | $ | 58 | $ | 125 | ||||||||||||||||||||||
New York | 1 | 3/22/2013 | 11,050 | 11,119 | — | (69 | ) | 2,122 | 8,736 | 192 | 244 | |||||||||||||||||||||||||||||
Massachusetts | 1 | 3/22/2013 | 8,850 | 8,848 | — | 2 | 1,553 | 7,186 | 111 | 141 | ||||||||||||||||||||||||||||||
New York | 2 | 8/29/2013 | 22,000 | 21,985 | — | 15 | 3,320 | 18,378 | 302 | 466 | ||||||||||||||||||||||||||||||
Colorado | 1 | 9/30/2013 | 5,940 | 5,859 | — | 81 | 628 | 5,201 | 111 | 167 | ||||||||||||||||||||||||||||||
New Jersey | 1 | 11/26/2013 | 8,535 | 8,499 | — | 36 | 1,843 | 6,544 | 148 | 249 | ||||||||||||||||||||||||||||||
Florida | 1 | 12/4/2013 | 6,300 | 6,231 | — | 69 | 868 | 5,306 | 126 | 153 | ||||||||||||||||||||||||||||||
Texas | 1 | 12/27/2013 | 6,900 | 6,873 | — | 27 | 1,547 | 5,226 | 127 | 337 | ||||||||||||||||||||||||||||||
Connecticut | 1 | 12/30/2013 | 10,160 | 10,209 | — | (49 | ) | 1,174 | 8,817 | 169 | 196 | |||||||||||||||||||||||||||||
New Jersey | 1 | 12/30/2013 | 12,765 | 12,754 | — | 11 | 1,639 | 10,946 | 180 | 359 | ||||||||||||||||||||||||||||||
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Total acquired 2013 | 11 | $ | 94,900 | $ | 94,759 | $ | — | $ | 141 | $ | 15,031 | $ | 78,345 | $ | 1,524 | $ | 2,437 | |||||||||||||||||||||||
Leased stores (CT, NY) | 4 | 11/1/2013 | — | — | — | — | — | — | — | 692 | ||||||||||||||||||||||||||||||
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Total acquired or leased 2013 | 15 | $ | 94,900 | $ | 94,759 | $ | — | $ | 141 | $ | 15,031 | $ | 78,345 | $ | 1,524 | $ | 3,129 | |||||||||||||||||||||||
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(dollars in thousands) | Consideration paid | Acquisition Date Fair Value | ||||||||||||||||||||||||||||||||||||||||||||||
States | Number of Properties | Date of Acquisition | Purchase Price | Cash Paid | Value of Operating Partnership Units Issued | Mortgage Assumed | Net Other Liabilities Assumed (Assets Acquired) | Land | Building, Equipment, and Improvements | In-Place Customer Leases | Trade Name | Closing Costs Expensed | ||||||||||||||||||||||||||||||||||||
2016 | ||||||||||||||||||||||||||||||||||||||||||||||||
FL | 4 | 1/6/2016 | $ | 20,350 | $ | 20,246 | $ | — | $ | — | $ | 104 | $ | 6,646 | $ | 13,339 | $ | 365 | $ | — | $ | 437 | ||||||||||||||||||||||||||
CA | 4 | 1/21/2016 | 80,603 | 80,415 | — | — | 188 | 28,420 | 51,145 | 1,038 | — | 397 | ||||||||||||||||||||||||||||||||||||
NH | 5 | 1/21/2016 | 55,435 | 55,151 | — | — | 284 | 13,281 | 41,237 | 917 | — | 657 | ||||||||||||||||||||||||||||||||||||
MA | 1 | 1/21/2016 | 11,387 | 11,362 | — | — | 25 | 4,880 | 6,341 | 166 | — | 81 | ||||||||||||||||||||||||||||||||||||
TX | 3 | 1/21/2016 | 38,975 | 38,819 | — | — | 156 | 19,796 | 18,598 | 581 | — | 299 | ||||||||||||||||||||||||||||||||||||
AZ | 1 | 2/1/2016 | 9,275 | 9,261 | — | — | 14 | 988 | 8,224 | 63 | — | 136 | ||||||||||||||||||||||||||||||||||||
FL | 1 | 2/12/2016 | 11,274 | 11,270 | — | — | 4 | 2,294 | 8,980 | — | — | — | ||||||||||||||||||||||||||||||||||||
PA | 1 | 2/17/2016 | 5,750 | 5,732 | — | — | 18 | 1,768 | 3,879 | 103 | — | 164 | ||||||||||||||||||||||||||||||||||||
CO | 1 | 2/29/2016 | 12,600 | 12,549 | — | — | 51 | 4,528 | 7,915 | 157 | — | 188 | ||||||||||||||||||||||||||||||||||||
CA | 3 | 3/16/2016 | 68,832 | 63,965 | 4,472 | — | 395 | 22,647 | 45,371 | 814 | — | 313 | ||||||||||||||||||||||||||||||||||||
CA | 1 | 3/17/2016 | 17,320 | 17,278 | — | — | 42 | 6,728 | 10,339 | 253 | — | 132 | ||||||||||||||||||||||||||||||||||||
CA | 1 | 4/11/2016 | 36,750 | 33,346 | 3,294 | — | 110 | 17,445 | 18,840 | 465 | — | 141 | ||||||||||||||||||||||||||||||||||||
CT | 2 | 4/14/2016 | 17,313 | 17,152 | — | — | 161 | 6,142 | 10,904 | 267 | — | 204 | ||||||||||||||||||||||||||||||||||||
NY | 2 | 4/26/2016 | 24,312 | 20,143 | — | 4,249 | (80 | ) | 5,710 | 18,201 | 401 | — | 372 | |||||||||||||||||||||||||||||||||||
FL | 1 | 5/2/2016 | 8,100 | 4,006 | — | 4,036 | 58 | 3,018 | 4,922 | 160 | — | 161 | ||||||||||||||||||||||||||||||||||||
TX | 1 | 5/5/2016 | 10,800 | 10,708 | — | — | 92 | 2,333 | 8,302 | 165 | — | 133 | ||||||||||||||||||||||||||||||||||||
NY | 2 | 5/19/2016 | 8,400 | 8,366 | — | — | 34 | 714 | 7,521 | 165 | — | 213 | ||||||||||||||||||||||||||||||||||||
CA, CO, FL, IL, MS, NV, TX, UT, WI | 83 | 7/15/2016 | 1,299,740 | 1,335,274 | — | — | (35,534 | ) | 150,660 | 1,085,750 | 46,830 | 16,500 | 25,398 | |||||||||||||||||||||||||||||||||||
SC | 1 | 7/29/2016 | 8,620 | 8,617 | — | — | 3 | 920 | 7,700 | — | — | — | ||||||||||||||||||||||||||||||||||||
CO | 1 | 8/4/2016 | 8,900 | 8,831 | — | — | 69 | 5,062 | 3,679 | 159 | — | 119 | ||||||||||||||||||||||||||||||||||||
FL | 1 | 9/27/2016 | 10,500 | 10,407 | — | — | 93 | 2,809 | 7,523 | 168 | — | 244 | ||||||||||||||||||||||||||||||||||||
IL | 1 | 11/17/2016 | 8,884 | 7,125 | 1,750 | — | 9 | 371 | 8,513 | — | — | — | ||||||||||||||||||||||||||||||||||||
FL | 1 | 12/20/2016 | 9,800 | 6,900 | — | 2,966 | (66 | ) | 3,268 | 6,378 | 154 | — | 98 | |||||||||||||||||||||||||||||||||||
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Total acquired 2016 | 122 | $ | 1,783,920 | $ | 1,796,923 | $ | 9,516 | $ | 11,251 | $ | (33,770 | ) | $ | 310,428 | $ | 1,403,601 | $ | 53,391 | $ | 16,500 | $ | 29,887 |
(dollars in thousands) State 2015 CT NY IL IL FL TX FL FL AZ MA NY NC SC PA Total acquired 2015 Consideration paid Acquisition Date Fair Value Number of
Properties Date of
Acquisition Purchase
Price Cash Paid Value of
Operating
Partnership
Units
Issued Net Other
Liabilities
Assumed
(Assets
Acquired) Land Building,
Equipment,
and
Improvements In-Place
Customer
Leases Closing
Costs
Expensed 2 2/2/2015 $ 61,116 $ 62,377 $ — $ (1,261 ) $ 19,389 $ 41,727 $ — $ — 2 2/2/2015 57,900 59,103 — (1,203 ) 10,084 47,816 — — 1 2/5/2015 6,800 6,652 — 148 2,579 4,066 155 146 1 3/9/2015 8,690 6,466 2,148 76 1,719 6,971 — — 1 4/1/2015 6,290 6,236 — 54 1,793 4,382 115 359 1 4/16/2015 8,800 8,713 — 87 3,864 4,777 159 140 1 4/21/2015 8,750 8,687 — 63 2,118 6,501 131 122 4 5/1/2015 32,465 32,279 — 186 12,184 19,672 609 516 1 6/16/2015 7,904 7,904 — — 852 7,052 — — 1 6/19/2015 10,291 10,286 — 5 2,110 8,181 — — 4 8/25/2015 17,900 17,690 — 210 4,685 12,826 389 409 1 9/1/2015 3,775 3,762 — 13 718 2,977 80 80 6 9/1/2015 44,000 43,564 — 436 17,461 25,644 895 684 1 12/30/2015 6,550 6,541 — 9 1,926 4,498 126 190 27 $ 281,231 $ 280,260 $ 2,148 $ (1,177 ) $ 81,482 $ 197,090 $ 2,659 $ 2,646
All of the properties acquired in 2014 and 2013 were purchased from unrelated third parties. The operating results of the four facilities which had been leased since November 1, 2013 have been included in the Company’s operations since that date. The operating results of the other facilities acquired facilities have been included in the Company’s operations since the respective acquisition dates. The $1,796.9 million of cash paid for the properties acquired during 2016 includes payment for cash acquired of $40.9 million and $5.3 million of deposits that were paid in 2015 when certain of these properties originally went under contract. Of the $287.3$280.3 million paid at closing for the properties acquired during 2014, $5.6 million2015, $250,000 represented deposits that were paid in 20132014 when certain of these properties originally went under contract.
Non-cash investing activities during 2016 include the issuance of $9.5 million in Operating Partnership Units valued based on the market price of the Company’s common stock at the date of acquisition, the assumption of three mortgages with acquisition-date fair values of $11.3 million, and the assumption of net other liabilities of $7.2 million. Non-cash investing activities during 2015 include the issuance of $2.1 million in Operating Partnership Units, the assumption of $1.3 million of other net liabilities and $2.5 million for the settlement of a straight-line rent liability in connection with the acquisition of self-storage facilities.
The Company measures the fair value of in-place customer lease intangible assets based on the Company’s experience with customer turnover.turnover and the estimated cost to replace the in-place leases. The Company amortizes in-place customer leases on a straight-line basis over 12 months (the estimated future benefit period). The Company measures the value of trade names, which have an indefinite life and are not amortized, by calculating discounted cash flows utilizing the relief from royalty method.
In-place customer leases are included in other assets on the Company’s consolidated balance sheetsheets as follows:
(Dollars in thousands) | 2014 | 2013 | ||||||||||||||
(dollars in thousands) | 2016 | 2015 | ||||||||||||||
In-place customer leases | $ | 19,867 | $ | 14,643 | $ | 75,611 | $ | 22,320 | ||||||||
Accumulated amortization | (17,663 | ) | (13,551 | ) | (50,782 | ) | (21,017 | ) | ||||||||
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Net carrying value at December 31, | $ | 2,204 | $ | 1,092 | $ | 24,829 | $ | 1,303 | ||||||||
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Amortization expense related to in-place customer leases was $4.1$29.9 million, $3.3$3.4 million, and $3.3$4.1 million, for the years ended December 31, 2014, 2013,2016, 2015, and 2012,2014, respectively. Amortization expense in 2015on 2016 acquisitions is expected to be $2.2 million.$24.8 million in 2017.
As noted above, during 2014,2016, the Company acquired 33 properties.122 properties, 119 of which were accounted for as business combinations. The following unaudited pro forma information is based on the combined historical financial statements of the Company and the 33119 properties acquired during 2016, and presents the Company’s resultsaccounted for as business acquisitions, as if the acquisitions had occurred as of January 1, 2012:2015:
(dollars in thousands) | 2014 | 2013 | 2012 | 2016 | 2015 | |||||||||||||||
Total revenues | $ | 337,168 | $ | 300,589 | $ | 258,450 | $ | 513,565 | $ | 465,614 | ||||||||||
Net income attributable to common shareholders | $ | 99,103 | $ | 75,622 | $ | 41,942 | $ | 154,522 | $ | 54,144 | ||||||||||
Earnings per common share | ||||||||||||||||||||
Basic | $ | 2.94 | $ | 2.25 | $ | 1.25 | $ | 3.34 | $ | 1.17 | ||||||||||
Diluted | $ | 2.93 | $ | 2.23 | $ | 1.24 | $ | 3.33 | $ | 1.17 |
The above pro forma information includes the results of eight stores acquired by LS in 2016 and 17 stores acquired by LS in 2015. These stores therefore were not owned by LS for the entire pro forma periods and results prior to LS ownership are not included in the above pro forma information. The above pro forma information also includes increases in amortization of in-place customer leases totaling $53.4 million in 2015. As noted above, in-place customer leases are amortized over their estimated future benefit period of 12 months. Material, nonrecurring pro forma adjustments directly attributable to the business combinations and included in the above pro forma financial information include reductions to interest expense related to acquisition bridge financing totaling $7.3 million in 2016, reductions to acquisition costs totaling $29.5 million in 2016, and reductions to write-off of acquired property deposits totaling $1.8 million in 2016.
The following table summarizes the revenues and earnings related to the 33 properties since the acquisition dates that are included in the Company’s 20142016 consolidated statementsstatement of operations.operations related to the 119 properties acquired and accounted for as business combinations during 2016.
(dollars in thousands) | ||||||||
Total revenues | $ | 16,793 | $ | 68,526 | ||||
Net loss attributable to common shareholders | $ | (7,953 | ) | $ | (52,814 | ) |
The above net lossesloss attributable to common shareholders werewas primarily due to amortization of in-place customer leases acquired and the acquisition costs incurred in connection with the 20142016 acquisitions.
5. DISCONTINUED OPERATIONSProperty Dispositions
In the 4th quarter of 2013,During 2016 the Company sold foureight non-strategic storage facilities in Florida (2), Ohio (1),properties with a carrying value of $18.8 million and Virginia (1) for netreceived cash proceeds of approximately $11.7$34.1 million, resulting in a $15.3 million gain of approximately $2.4 million. In 2012,on sale. During 2015 the Company sold 17three non-strategic storage facilitiesproperties purchased in Maryland (1), Michigan (4),2014 and Texas (12) for net2015 with a carrying value of $5.1 million and received cash proceeds of approximately $47.7$4.6 million, resulting in a $0.5 million loss on sale. During 2014 the Company sold two properties with a carrying value of $5.8 million and received cash proceeds of $11.0 million, resulting in a $5.2 million gain on sale.
The following table summarizes the revenues and expenses up to the dates of sale of the 13 properties sold in 2016, 2015 and 2014 that are included in the Company’s consolidated statements of operations for 2016, 2015 and 2014.
(dollars in thousands) | 2016 | 2015 | 2014 | |||||||||
Total revenues | $ | 2,324 | $ | 4,801 | $ | 5,782 | ||||||
Property operations and maintenance expense | (614 | ) | (1,401 | ) | (1,477 | ) | ||||||
Real estate tax expense | (98 | ) | (295 | ) | (424 | ) | ||||||
Depreciation and amortization expense | (359 | ) | (780 | ) | (820 | ) | ||||||
Gain (loss) on sale of storage facilities | 15,270 | (494 | ) | 5,176 | ||||||||
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$ | 16,523 | $ | 1,831 | $ | 8,237 | |||||||
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Change in Signage Useful Life Estimates
The change in name of the Company’s storage facilities from Uncle Bob’s Self Storage® to Life Storage® as discussed in Note 1 requires replacement of signage at all existing storage facilities which are currently included in investment in storage facilities, net on the consolidated balance sheets. The replacement of this signage is being completed at various times based on market, and is expected to be completed in the first half of 2017. The Company has reassessed the estimated useful lives of the existing signage which resulted in an increase in depreciation expense of approximately $4.5 million. The operations of these facilities and$8.2 million in 2016 as depreciation was accelerated over the loss or gain on sale are reported as discontinued operations. Cash flows of discontinued operations have not been segregated from the cash flows of continuing operations on the accompanying consolidated statement of cash flows for the years ended December 31, 2013 and 2012.new useful lives. The Company did not report any dispositionsestimates that this change will result in depreciation expense of facilitiesapproximately $1 million in 2017 as discontinued operations in 2014. The following is a summaryresult of the amounts reported as discontinued operations in 2013replacement of this existing Uncle Bob’s Self Storage® signage.
The accelerated depreciation reduced 2016 basic and 2012:diluted earnings by approximately $0.19 per share/unit.
Year Ended December 31, | ||||||||
(dollars in thousands) | 2013 | 2012 | ||||||
Total revenue | $ | 1,726 | $ | 7,069 | ||||
Property operations and maintenance expense | (576 | ) | (2,189 | ) | ||||
Real estate tax expense | (145 | ) | (721 | ) | ||||
Depreciation and amortization expense | (313 | ) | (1,137 | ) | ||||
Net realized gain (loss) on sale of property | 2,431 | 4,498 | ||||||
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Total income from discontinued operations | $ | 3,123 | $ | 7,520 | ||||
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Income from continuing operations attributable to common shareholders was $71.0 million and $47.7 million in 2013, and 2012, respectively. Income from discontinued operations attributable to common shareholders was $3.1 million and $7.5 million in 2013, and 2012, respectively.
6.5. UNSECURED LINE OF CREDIT AND TERM NOTES
Borrowings outstanding on our unsecured line of credit and term notes are as follows:
Dec. 31, | Dec. 31, | |||||||||||||||
(Dollars in thousands) | 2014 | 2013 | ||||||||||||||
(Dollars in thousands) | Dec. 31, 2016 | Dec. 31, 2015 | ||||||||||||||
Revolving line of credit borrowings | $ | 49,000 | $ | 49,000 | $ | 253,000 | $ | 79,000 | ||||||||
Term note due April 13, 2016 | 150,000 | 150,000 | ||||||||||||||
Term note due April 26, 2016 | — | 150,000 | ||||||||||||||
Term note due June 4, 2020 | 325,000 | 325,000 | 325,000 | 325,000 | ||||||||||||
Term note due August 5, 2021 | 100,000 | 100,000 | 100,000 | 100,000 | ||||||||||||
Term note due April 8, 2024 | 175,000 | — | 175,000 | 175,000 | ||||||||||||
Senior term note due July 1, 2026 | 600,000 | — | ||||||||||||||
Term note due July 21, 2028 | 200,000 | — | ||||||||||||||
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Total term notes payable | $ | 750,000 | $ | 575,000 | ||||||||||||
Total term note principal balance outstanding | $ | 1,400,000 | $ | 750,000 | ||||||||||||
Less: unamortized debt issuance costs | (9,323 | ) | (3,350 | ) | ||||||||||||
Less: unamortized senior term note discount | (3,152 | ) | — | |||||||||||||
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Term notes payable | $ | 1,387,525 | $ | 746,650 | ||||||||||||
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On December 10, 2014,In January 2016, the Company amendedexercised the expansion feature on its existing amended unsecured credit agreement. As part ofagreement and increased the amended agreement, the Company increased its revolving credit limit from $175$300 million to $300$500 million. The interest rate on the revolving credit facility bears interest at a variable annual rate equal to LIBOR plus a margin based on the Company’s credit rating (at December 31, 20142016 the margin is 1.30%1.10%), and requires a 0.20%an annual 0.15% facility fee. The amendedCompany’s unsecured credit agreement also reduced the interest rate on theincludes a $325 million unsecured term note maturing June 4, 2020, with the term note bearing interest at LIBOR plus a margin based on the Company’s credit rating (at December 31, 20142016 the margin is 1.40%1.15%). The interest rate at December 31, 20142016 on the Company’s line of credit was approximately 1.46% (1.67%1.79% (1.72% at December 31, 2013)2015). At December 31, 2014,2016, there was $250.3$247 million available on the unsecured line of credit net of outstanding letters of credit of $0.7 million.credit. The revolving line of credit has a maturity date of December 10, 2019. The amended agreement also provides
On May 17, 2016, the Company entered into two senior unsecured acquisition bridge facilities (the “Bridge Facilities”) totaling $1,675 million with the Company’s third-party advisors to the LS acquisition (see Note 4). In consideration for an increasethe bridge financing commitments, the Company paid fees totaling $7.3 million which are included as interest expense – bridge financing commitment fee in the revolving credit facility2016 consolidated statement of operations. The Bridge Facilities commitments were not drawn upon and were terminated on June 29, 2016.
On June 20, 2016, the bank termOperating Partnership issued $600 million in aggregate principal amount of 3.50% unsecured senior notes due July 1, 2026 (the “2026 Senior Notes”). The 2026 Senior Notes were issued at a 0.553% discount to par value. Interest on the Company’s request2026 Senior Notes is payable semi-annually in arrears on January 1 and July 1, beginning on January 1, 2017. The 2026 Senior Notes are fully and unconditionally guaranteed by the Parent Company. Proceeds received upon issuance, net of discount to an aggregate amount up to $850par of $3.3 million and underwriting discount and other offering expenses of $5.5 million, totaled $591.2 million.
In connection with The indenture under which the execution2026 Senior Notes were issued restricts the ability of the amendmentCompany and its subsidiaries to our unsecured credit agreement, it was determined thatincur debt unless the borrowing capacityCompany and its consolidated subsidiaries comply with a leverage ratio not to exceed 60% and an interest coverage ratio of ninemore than 1.5:1 on all outstanding debt, after giving effect to the incurrence of the lenders participating indebt. The indenture also restricts the revolving lineability of credit exceeded their borrowing capacities priorthe Company and its subsidiaries to incur secured debt unless the Company and its consolidated subsidiaries comply with a secured debt leverage ratio not to exceed 40% after giving effect to the amendment. As a result, for these nine lenders the unamortized deferred financing costs associated with the agreement prior to its amendment remain deferred and are being amortized to interest expense over the termincurrence of the newly amended agreement. Feesdebt. The indenture also contains other financial and other costs paidcustomary covenants, including a covenant not to execute the amendment relating to the revolving line of credit totaling $1.3 million were recorded as additional deferred financing costs and are being amortized to interest expense over the termown unencumbered assets with a value less than 150% of the newly amended agreement.
Theunsecured indebtedness of the Company paid $1.0 millionand its consolidated subsidiaries. As of December 31, 2016, the Company was in fees to lenders for their commitmentscompliance with all of the financial covenants under the unsecured2026 Senior Notes.
On July 21, 2016, the Company entered into a $200 million term note maturing July 21, 2028 bearing interest at a fixed rate of 3.67%. The proceeds from this term note were used to repay a portion of the newly amended agreement. These lenders’ commitments were determined to be a modificationthen outstanding balance on the Company’s line of their unsecured term note commitments prior to the amendment. Such costs were recorded as additional deferred financing costs and are being amortized to interest expense over the term of the newly amended agreement. In addition, for the nine continuing lenders’ the previously unamortized deferred financing costs associated with the unsecured term note commitments prior to the amendment remain deferred and are being amortized to interest expense over the term of the newly amended agreement.credit.
On April 8, 2014, the Company entered into a $175 million term note maturing April 2024 bearing interest at a fixed rate of 4.533%. The interest rate on the term note increases to 6.283% if the Company is not rated by at least one rating agency or if the Company’s credit rating is downgraded. The proceeds from this term note were used to repay the $115 million outstanding on the Company’s line of credit at April 8, 2014, with the excess proceeds used for acquisitions.
In 2011, the Company entered into a $100 million term note maturing August 5, 2021 bearing interest at a
fixed rate of 5.54%. The interest rate on the term note increases to 7.29% if the notes are not rated by at least one rating agency, the credit rating on the notes is downgraded or if the Company’s credit rating is downgraded. The proceeds from this term note were used to fund acquisitions and investments in unconsolidated joint ventures.
The Company also maintainshad maintained a $150 million unsecured term note maturing April 13,26, 2016 bearing interest at 6.38%. The interest rateCompany used a draw on the $150 million unsecured termline of credit to pay off the balance of this note increases to 8.13% if the notes are not rated by at least one rating agency, the credit rating on the notes is downgraded or the Company’s credit rating is downgraded.April 26, 2016.
The line of credit and term notes require the Company to meet certain financial covenants, measured on a quarterly basis, including prescribed leverage, fixed charge coverage, minimum net worth, limitations on additional indebtedness and limitations on dividend payouts. At December 31, 2014,2016, the Company was in compliance with its debt covenants.
We believe that if operating results remain consistent with historical levels and levels of other debt and liabilities remain consistent with amounts outstanding at December 31, 20142016 the entire availability on the line of credit could be drawn without violating our debt covenants.
The Company’s fixed rate term notes contain a provision that allows for the noteholders to call the debt upon a change of control of the Company at an amount that includes a make whole premium based on rates in effect on the date of the change of control.
7.Subsequent to the adoption of ASU 2015-03, deferred debt issuance costs and the discount on the 2026 Senior Notes are both presented as reductions of term notes in the accompanying consolidated balance sheets at December 31, 2016 and December 31, 2015. Amortization expense related to these deferred debt issuance costs, which exclude costs related to the Bridge Facilities, was $1.7 million, $1.2 million and $0.9 million for the periods ended December 31, 2016, 2015 and 2014, respectively, and is included in interest expense in the consolidated statements of operations.
6. MORTGAGES PAYABLE AND DEBT MATURITIES
Mortgages payable at December 31, 20142016 and 20132015 consist of the following:
(dollars in thousands) | December 31, 2014 | December 31, 2013 | December 31, 2016 | December 31, 2015 | ||||||||||||
5.99% mortgage notes due May 1, 2026, secured by 1 self-storage facility with an aggregate net book value of $4.4 million, principal and interest paid monthly (effective interest rate 6.19%) | 2,127 | 2,254 | ||||||||||||||
4.98% mortgage note due January 1, 2021 secured by one self-storage facility with an aggregate net book value of $9.8 million, principal and interest paid monthly (effective interest rate 4.98%) | $ | 2,966 | $ | — | ||||||||||||
4.065% mortgage note due April 1, 2023, secured by one self-storage facility with an aggregate net book value of $7.6 million, principal and interest paid monthly (effective interest rate 4.23%) | 4,207 | — | ||||||||||||||
5.26% mortgage note due November 1, 2023, secured by one self-storage facility with an aggregate net book value of $8.1 million, principal and interest paid monthly (effective interest rate 5.48%) | 4,002 | — | ||||||||||||||
5.99% mortgage note due May 1, 2026, secured by one self-storage facility with an aggregate net book value of $4.2 million, principal and interest paid monthly (effective interest rate 6.21%) | 1,852 | 1,993 | ||||||||||||||
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Total mortgages payable | $ | 2,127 | $ | 2,254 | $ | 13,027 | $ | 1,993 | ||||||||
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The table below summarizes the Company’s debt obligations and interest rate derivatives at December 31, 2014.2016. The estimated fair value of financial instruments is subjective in nature and is dependent on a number of important assumptions, including discount rates and relevant comparable market information associated with each financial instrument. The fair value of the fixed rate term notes and mortgage notes were estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. These assumptions are considered Level 2 inputs within the fair value hierarchy as described in Note 9.8. The carrying values of our variable rate debt instruments approximate their fair values as these debt instruments bear interest at current market rates that approximate market participant rates. This is considered a Level 2 input within the fair value hierarchy. The use of different market assumptions and estimation methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the estimates presented below are not necessarily indicative of the amounts the Company would realize in a current market exchange.
Expected Maturity Date Including Discount | ||||||||||||||||||||||||||||||||
(dollars in thousands) | 2017 | 2018 | 2019 | 2020 | 2021 | Thereafter | Total | Fair Value | ||||||||||||||||||||||||
Line of credit—variable rate LIBOR + 1.10% (1.79% at December 31, 2016) | — | — | $ | 253,000 | — | — | — | $ | 253,000 | $ | 253,000 | |||||||||||||||||||||
Notes Payable: | ||||||||||||||||||||||||||||||||
Term note—variable rate LIBOR+1.15% (1.92% at December 31, 2016) | — | — | — | $ | 325,000 | — | — | $ | 325,000 | $ | 325,000 | |||||||||||||||||||||
Term note—fixed rate 5.54% | — | — | — | — | $ | 100,000 | — | $ | 100,000 | $ | 109,379 | |||||||||||||||||||||
Term note—fixed rate 4.533% | — | — | — | — | — | $ | 175,000 | $ | 175,000 | $ | 181,567 | |||||||||||||||||||||
Term note—fixed rate 3.50% | — | — | — | — | — | $ | 600,000 | $ | 600,000 | $ | 574,126 | |||||||||||||||||||||
Term note—fixed rate 3.67% | — | — | — | — | — | $ | 200,000 | $ | 200,000 | $ | 188,284 | |||||||||||||||||||||
Mortgage note—fixed rate 4.98% | $ | 51 | $ | 53 | $ | 56 | $ | 58 | $ | 2,748 | — | $ | 2,966 | $ | 2,966 | |||||||||||||||||
Mortgage note—fixed rate 4.065% | $ | 88 | $ | 92 | $ | 96 | $ | 99 | $ | 104 | $ | 3,728 | $ | 4,207 | $ | 4,210 | ||||||||||||||||
Mortgage note—fixed rate 5.26% | $ | 63 | $ | 67 | $ | 71 | $ | 74 | $ | 78 | $ | 3,649 | $ | 4,002 | $ | 4,281 | ||||||||||||||||
Mortgage note—fixed rate 5.99% | $ | 151 | $ | 160 | $ | 170 | $ | 181 | $ | 192 | $ | 998 | $ | 1,852 | $ | 1,997 | ||||||||||||||||
Interest rate derivatives – liability | — | — | — | — | — | — | — | $ | 13,015 |
(dollars in thousands) Line of credit - variable rate LIBOR + 1.30% (1.46% at December 31, 2014) Notes Payable: Term note - fixed rate 6.38% Term note - variable rate LIBOR+1.40% (1.56% at December 31, 2014) Term note - fixed rate 5.54% Term note - fixed rate 4.533% Mortgage note - fixed rate 5.99% Interest rate derivatives – liability Expected Maturity Date Including Discount 2015 2016 2017 2018 2019 Thereafter Total Fair Value — — — — $ 49,000 — $ 49,000 $ 49,000 — $ 150,000 — — — — $ 150,000 $ 161,166 — — — — — $ 325,000 $ 325,000 $ 325,000 — — — — — $ 100,000 $ 100,000 $ 111,452 — — — — — $ 175,000 $ 175,000 $ 181,331 $ 134 $ 142 $ 151 $ 160 $ 170 $ 1,370 $ 2,127 $ 2,277 — — — — — — — $ 13,341
8.7. DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate swaps are used to adjust the proportion of total debt that is subject to variable interest rates. The interest rate swaps require the Company to pay an amount equal to a specific fixed rate of interest times a notional principal amount and to receive in return an amount equal to a variable rate of interest times the same notional amount. The notional amounts are not exchanged. Forward starting interest rate swaps are also used by the Company to hedge the risk of changes in the interest-related cash outflows associated with the potential issuance of long-term debt. No other cash payments are made unless the contract is terminated prior to its maturity, in which case the contract would likely be settled for an amount equal to its fair value. The Company enters into interest rate swaps with a number of major financial institutions to minimize counterparty credit risk.
The interest rate swaps qualify and are designated as hedges of the amount of future cash flows related to interest payments on variable rate debt. Therefore, the interest rate swaps are recorded in the consolidated balance sheetsheets at fair value and the related gains or losses are deferred in shareholders’ equity or partners’ capital as Accumulated Other Comprehensive Loss (“AOCL”). These deferred gains and losses are recognized in interest expense during the period or periods in which the related interest payments affect earnings. However, to the extent that the interest rate swaps are not perfectly effective in offsetting the change in value of the interest payments being hedged, the ineffective portion of these contracts is recognized in earnings immediately. Ineffectiveness was deminimusde minimis in 2014, 2013,2016, 2015, and 2012.2014.
The Company has interest rate swap agreements in effect at December 31, 20142016 as detailed below to effectively convert a total of $325 million of variable-rate debt to fixed-rate debt.
Notional Amount | Effective Date | Expiration Date | Fixed Rate Paid | Floating Rate | ||||||||||||
$125 Million | 9/1/2011 | 8/1/18 | 2.3700 | % | 1 month LIBOR | |||||||||||
$100 Million | 12/30/11 | 12/29/17 | 1.6125 | % | 1 month LIBOR | |||||||||||
$100 Million | 9/4/13 | 9/4/18 | 1.3710 | % | 1 month LIBOR | |||||||||||
$100 Million | 12/29/17 | 11/29/19 | 3.9680 | % | 1 month LIBOR | |||||||||||
$125 Million | 8/1/18 | 6/1/20 | 4.1930 | % | 1 month LIBOR |
In the fourth quarter of 2015, the Company entered into forward starting interest rate swap agreements with a total notional value of $50 million. In the first quarter of 2016, the Company entered into additional forward starting interest rate swap agreements with a total notional value of $100 million. These forward starting interest rate swap agreements were entered into to hedge the risk of changes in the interest-related cash flows associated with the potential issuance of fixed rate long-term debt. In conjunction with the issuance of the 2026 Senior Notes (see Note 5), the Company terminated these hedges and settled the forward starting swap agreements for approximately $9.2 million. The $9.2 million has been deferred in accumulated other comprehensive loss and is being amortized as additional interest expense over the ten-year term of the 2026 Senior Notes or until such time as interest payments on the 2026 Senior Notes are no longer probable. Approximately $0.5 million of interest expense was recorded in 2016 as a result of this amortization. Consistent with the Company’s accounting policy, the cash outflow related to the settlement of the forward starting swap agreements is reflected as a financing activity in the consolidated statements of cash flows.
The interest rate swap agreements are the only derivative instruments, as defined by FASB ASC Topic 815 “Derivatives and Hedging”, held by the Company. During 2014, 2013,2016, 2015, and 2012,2014, the net reclassification from AOCL to interest expense was $5.5$4.6 million, $5.3$5.2 million, and $4.9$5.5 million, respectively, based on payments made under the swap agreements. Based on current interest rates, the Company estimates that payments under the interest rate swaps will be approximately $5.5$4.0 million in 2015.2017. Payments made under the interest rate swap agreements will be reclassified to interest expense as settlements occur. The fair value of the swap agreements, including accrued interest, was a liability of $13.3$13.0 million at December 31, 2014,2016 and an asset of $0.8 million$550,000 and a liability of $7.5$15.3 million at December 31, 2013.2015.
The Company’s agreements with its interest rate swap counterparties contain provisions pursuant to which the Company could be declared in default of its derivative obligations if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender. The interest rate swap agreements also incorporate other loan covenants of the Company. Failure to comply with the
loan covenant provisions would result in the Company being in default on the interest rate swap agreements. As of December 31, 2014,2016, the Company had not posted any collateral related to the interest rate swap agreements. If the Company had breached any of these provisions as of December 31, 2014,2016, it could have been required to settle its obligations under the agreements at their net termination value of $13.3$13.0 million.
The changes in AOCL for the years ended December 31, 2014, 20132016, 2015 and 20122014 are summarized as follows:
(dollars in thousands) | Jan. 1, 2014 to Dec. 31, 2014 | Jan. 1, 2013 to Dec. 31, 2013 | Jan. 1, 2012 to Dec. 31, 2012 | Jan. 1, 2016 to Dec. 31, 2016 | Jan. 1, 2015 to Dec. 31, 2015 | Jan. 1, 2014 to Dec. 31, 2014 | ||||||||||||||||||
Accumulated other comprehensive loss beginning of period | $ | (6,402 | ) | $ | (15,242 | ) | $ | (10,255 | ) | $ | (14,415 | ) | $ | (13,005 | ) | $ | (6,402 | ) | ||||||
Realized loss reclassified from accumulated other comprehensive loss to interest expense | 5,506 | 5,299 | 4,889 | 5,044 | 5,229 | 5,506 | ||||||||||||||||||
Unrealized gain (loss) from changes in the fair value of the effective portion of the interest rate swaps | (12,109 | ) | 3,541 | (9,876 | ) | |||||||||||||||||||
Unrealized loss from changes in the fair value of the effective portion of the interest rate swaps | (12,104 | ) | (6,639 | ) | (12,109 | ) | ||||||||||||||||||
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(Loss) gain included in other comprehensive loss | (6,603 | ) | 8,840 | (4,987 | ) | |||||||||||||||||||
Loss included in other comprehensive loss | (7,060 | ) | (1,410 | ) | (6,603 | ) | ||||||||||||||||||
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Accumulated other comprehensive loss end of period | $ | (13,005 | ) | $ | (6,402 | ) | $ | (15,242 | ) | $ | (21,475 | ) | $ | (14,415 | ) | $ | (13,005 | ) | ||||||
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9.8. FAIR VALUE MEASUREMENTS
The Company applies the provisions of ASC Topic 820 “Fair Value Measurements and Disclosures” in determining the fair value of its financial and nonfinancial assets and liabilities. ASC Topic 820 establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration. Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
In May 2011 the FASB issued ASU No. 2011-04,Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in US GAAP and International Financial Reporting Standards (“IFRS”) (“ASU 2011-04”). ASU 2011-04 represents the converged guidance of the FASB and the IASB (the “Boards”) on fair value measurements. The collective efforts of the Boards and their staffs, reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term “fair value.” The Boards have concluded the common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with GAAP and IFRS. The amendments in this ASU were required to be applied prospectively, and were effective for interim and annual periods beginning after December 15, 2011. The Company adopted the provisions of ASU 2011-04 on January 1, 2012 and its adoption did not have a significant impact on the Company’s current fair value measurements or disclosures. The adoption is not expected to have a significant effect on any future fair value measurements or disclosures.
Refer to Note 76 for presentation of the fair values of debt obligations which are disclosed at fair value on a recurring basis.
The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2014 (in2016 and December 31, 2015 (dollars in thousands):
Asset (Liability) | Level 1 | Level 2 | Level 3 | |||||||||||||
Interest rate swaps | (13,341 | ) | — | (13,341 | ) | — |
Asset (Liability) | Level 1 | Level 2 | Level 3 | |||||||||||||
December 31, 2016 | ||||||||||||||||
Interest rate swaps | $ | (13,015 | ) | — | $ | (13,015 | ) | — | ||||||||
December 31, 2015 | ||||||||||||||||
Interest rate swaps | 550 | — | 550 | — | ||||||||||||
Interest rate swaps | (15,343 | ) | — | (15,343 | ) | — |
Interest rate swaps are over the counter securities with no quoted readily available Level 1 inputs, and therefore are measured at fair value using inputs that are directly observable in active markets and are classified within Level 2 of the valuation hierarchy, using the income approach.
During 2014,2016, assets and liabilities measured at fair value on a non-recurring basis included the assets acquired and liabilities assumed in connection with the acquisition of 33122 storage facilities (see note 4)., including the LS acquisition. To determine the fair value of land, the Company used prices per acre derived from observed transactions involving comparable land in similar locations, which is considered a Level 2 input. To determine the fair value of buildings, equipment and improvements, the Company used current replacement cost based on information derived from construction industry data by geographic region which is considered a Level 2 input. The
replacement cost is then adjusted for the age, condition, and economic obsolescence associated with these assets, which are considered Level 3 inputs. The fair value of in-place customer leases is based on the rent lost due to the amount of time required to replace existing customers and the cost to replace in-place tenants which isare based on the Company’s historical experience with turnover at its facilities and on market rental rates and estimated downtime required to replace the in-place leases, all of which are Level 3 inputs. The average downtime is based upon estimated demand information including the number of potential customers exhibited in historical property interest data. The fair value of trade names is based on royalty payments avoided had the trade name been owned by a third party which is a Level 3 input.determined using market royalty rates. Other assets acquired and liabilities assumed in the acquisitions consist primarily of prepaid or accrued real estate taxes and deferred revenues from advance monthly rentals paid by customers. The fair values of these assets and liabilities are based on their carrying values as they typically turn over within one year from the acquisition date and these are Level 3 inputs.
10.9. STOCK BASED COMPENSATION
The Company established the 20052015 Award and Option Plan (the “Plan”“2015 Plan”) which replaced the expired 19952005 Award and Option Plan for the purpose of attracting and retaining the Company’s executive officers and other key employees. 1,500,000employees, such plans being the “Plans”. There were 561,000 shares were authorized for issuance under the 2015 Plan. Options granted under the PlanPlans vest ratably over four and eight years, and must be exercised within ten years from the date of grant. The exercise price for qualified incentive stock options must be at least equal to the fair market value of the common shares at the date of grant. As of December 31, 2014,2016, options for 82,60677,206 shares were outstanding under the Plans and options for 543,229435,570 shares of common stock were available for future issuance. The Company may also grant other stock-based awards under the 2015 Plan, including restricted stock and performance-based vesting restricted stock awards.
The Company also established the 2009 Outside Directors’ Stock Option and Award Plan (the “Non-employee Plan”) which replaced the 1995 Outside Directors’ Stock Option Plan for the purpose of attracting and retaining the services of experienced and knowledgeable outside directors. ThePrior to 2016, the Non-employee Plan providesprovided for the initial granting of options to purchase 3,500 shares of common stock and for the annual granting of options to purchase 2,000 shares of common stock to each eligible director. Such options vest over a one-year period for initial awards and immediately upon subsequent grants. The issuance of stock options to directors was discontinued in 2016. In addition, each outside director receives non-vested shares annually equal to 80% of the annual fees paid to them. During the restriction period, the non-vested shares may not be sold, transferred, or otherwise encumbered. The holder of the non-vested shares has all rights of a holder of common shares, including the right to vote and receive dividends. During 2014, 1,6842016, 1,864 non-vested shares were issued to outside directors. Such non-vested shares vest over a one-year period. The total shares reserved under the Non-employee Plan is 150,000. The exercise price for options granted under the Non-employee Plan is equal to the fair market value at the date of grant. As of December 31, 2014,2016, options for 33,00018,500 common shares and 22,85016,984 of non-vested shares were outstanding under the Non-employee Plans. As of December 31, 20142016 options for 84,85571,016 shares of common stock were available for future issuance.
A summary of the Company’s stock option activity and related information for the years ended December 31 follows:
2014 | 2013 | 2012 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||||||||||||||||
Options | Weighted average exercise price | Options | Weighted average exercise price | Options | Weighted average exercise price | Options | Weighted average exercise price | Options | Weighted average exercise price | Options | Weighted average exercise price | |||||||||||||||||||||||||||||||||||||
Outstanding at beginning of year: | 130,568 | $ | 44.82 | 273,248 | $ | 43.45 | 364,268 | $ | 42.76 | 95,706 | $ | 52.08 | 115,606 | $ | 48.54 | 130,568 | $ | 44.82 | ||||||||||||||||||||||||||||||
Granted | 14,000 | 76.01 | 8,000 | 69.90 | 9,500 | 49.42 | — | — | 11,000 | 91.58 | 14,000 | 76.01 | ||||||||||||||||||||||||||||||||||||
Exercised | (27,462 | ) | 45.34 | (160,515 | ) | 43.72 | (91,520 | ) | 40.82 | — | — | (30,900 | ) | 52.87 | (27,462 | ) | 45.34 | |||||||||||||||||||||||||||||||
Adjusted / (forfeited) | (1,500 | ) | 40.07 | 9,835 | 36.37 | (9,000 | ) | 39.23 | — | — | — | — | (1,500 | ) | 40.07 | |||||||||||||||||||||||||||||||||
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Outstanding at end of year | 115,606 | $ | 48.54 | 130,568 | $ | 44.82 | 273,248 | $ | 43.45 | 95,706 | $ | 52.08 | 95,706 | $ | 52.08 | 115,606 | $ | 48.54 | ||||||||||||||||||||||||||||||
Exercisable at end of year | 67,316 | $ | 49.18 | 60,382 | $ | 46.85 | 165,667 | $ | 44.56 | 92,706 | $ | 51.31 | 63,815 | $ | 48.73 | 67,316 | $ | 49.18 |
A summary of the Company’s stock options outstanding at December 31, 20142016 follows:
Outstanding | Exercisable | |||||||||||||||
Exercise Price Range | Options | Weighted average exercise price | Options | Weighted average exercise price | ||||||||||||
$23.15 – 29.99 | 3,500 | $ | 23.15 | 3,500 | $ | 23.15 | ||||||||||
$30.00 – 39.99 | 5,000 | $ | 35.56 | 5,000 | $ | 35.56 | ||||||||||
$40.00 – 59.99 | 87,106 | $ | 44.41 | 44,816 | $ | 45.16 | ||||||||||
$60.00 – 76.07 | 20,000 | $ | 74.17 | 14,000 | $ | 73.43 | ||||||||||
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Total | 115,606 | $ | 48.54 | 67,316 | $ | 49.18 | ||||||||||
Intrinsic value of outstanding stock options at December 31, 2014 | $ | 4,472,123 | ||||||||||||||
Intrinsic value of exercisable stock options at December 31, 2014 | $ | 2,560,457 |
Outstanding | Exercisable | |||||||||||||||
Exercise Price Range | Options | Weighted average exercise price | Options | Weighted average exercise price | ||||||||||||
$30.00 – 39.99 | 1,100 | $ | 35.73 | 1,100 | $ | 35.73 | ||||||||||
$40.00 – 69.99 | 77,106 | $ | 44.67 | 77,106 | $ | 44.67 | ||||||||||
$70.00 – 91.58 | 17,500 | $ | 85.78 | 14,500 | $ | 87.82 | ||||||||||
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Total | 95,706 | $ | 52.08 | 92,706 | $ | 51.31 | ||||||||||
Intrinsic value of outstanding stock options at December 31, 2016 | $ | 3,244,663 | ||||||||||||||
Intrinsic value of exercisable stock options at December 31, 2016 | $ | 3,216,643 |
The intrinsic value of stock options exercised during the years ended December 31, 2016, 2015, and 2014 2013, and 2012, was $0.9 million, $3.6$0, $1.4 million, and $1.1$0.9 million, respectively.
Proceeds from stock options exercised during the years ended December 31, 2014, 2013,2016, 2015, and 20122014 amounted to $1.2 million, $7.0$0, $1.6 million, and $3.7$1.2 million, respectively.
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock at December 31, 2014,2016, or the price on the date of exercise for those exercised during the year. As of December 31, 2014,2016, there was approximately $0.2 million$22,000 of total unrecognized compensation cost related to stock option compensation arrangements granted under our stock award plans. That cost is expected to be recognized over a weighted-average period of approximately 1.61.5 years. The weighted average remaining contractual life of all options is 4.82.9 years, and for exercisable options is 5.22.8 years.
Non-vested stock
The Company has also issued shares of non-vested stock to employees which vest over one to nine year periods. During the restriction period, the non-vested shares may not be sold, transferred, or otherwise encumbered. The holder of the non-vested shares has all rights of a holder of common shares, including the right to vote and receive dividends. For issuances of non-vested stock during the year ended December 31, 2014,2016, the fair market value of the non-vested stock on the date of grant ranged from $46.95$82.52 to $87.92.$117.27. During 2014, 92,6652016, 23,405 shares of
non-vested stock were issued to employees and directors with an aggregate fair value of $5.6$2.1 million. The Company charges additional paid-in capital for the marketfair value of shares as they are issued. The unearned portion is then amortized and chargedratably to expense over the vesting period. The Company uses the average of the high and low price of its common stock on the date the award is granted as the fair value for non-vested stock awards that don’tdo not have a market condition.
A summary of the status of unvested shares of stock issued to employees and directors as of and during the years ended December 31 follows:
2014 | 2013 | 2012 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||||||||||||||||
Non-vested Shares | Weighted average grant date fair value | Non-vested Shares | Weighted average grant date fair value | Non-vested Shares | Weighted average grant date fair value | Non-vested Shares | Weighted average grant date fair value | Non-vested Shares | Weighted average grant date fair value | Non- vested Shares | Weighted average grant date fair value | |||||||||||||||||||||||||||||||||||||
Unvested at beginning of year: | 293,196 | $ | 49.20 | 187,535 | $ | 37.36 | 246,634 | $ | 37.93 | 305,520 | $ | 59.09 | 310,463 | $ | 51.93 | 293,196 | $ | 49.20 | ||||||||||||||||||||||||||||||
Granted | 92,665 | 60.87 | 189,080 | 54.78 | 2,592 | 49.42 | 23,405 | 89.30 | 64,665 | 94.74 | 92,665 | 60.87 | ||||||||||||||||||||||||||||||||||||
Vested | (72,876 | ) | 53.11 | (83,419 | ) | 35.28 | (60,912 | ) | 40.13 | (70,762 | ) | 69.82 | (69,187 | ) | 60.28 | (72,876 | ) | 53.11 | ||||||||||||||||||||||||||||||
Forfeited | (2,522 | ) | 28.66 | — | — | (779 | ) | 41.07 | — | — | (421 | ) | 76.07 | (2,522 | ) | 28.66 | ||||||||||||||||||||||||||||||||
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Unvested at end of year | 310,463 | $ | 51.93 | 293,196 | $ | 49.20 | 187,535 | $ | 37.36 | 258,163 | $ | 58.89 | 305,520 | $ | 59.09 | 310,463 | $ | 51.93 |
Compensation expense of $4.6$7.2 million, $2.9$6.3 million, and $2.4$4.6 million was recognized for the vested portion of non-vested stock grants in 2014, 20132016, 2015, and 2012,2014, respectively. The fair value of non-vested stock that vested during 2016, 2015, and 2014 2013 and 2012 was $3.9$4.9 million, $2.9$4.2 million, and $2.4$3.9 million, respectively. The total unrecognized compensation cost related to non-vested stock was $14.1$9.6 million at December 31, 2014,2016, and the remaining weighted-average period over which this expense will be recognized was 2.73.4 years.
Performance-based vesting restricted stockawards
During 2016 and 2015, the Company granted performance-based awards that entitle the recipients to earn up to 37,082 and 42,538 shares, respectively, if certain performance criteria are achieved over a three year period. The actual number of shares to be issued will be determined at the end of a three year period, and no performance-based shares were issued in 2016 or 2015. The Company granted and issued a total of 60,654 performance shares under the Plan during 2014 which are included in the table above. In 2013, the Company granted 87,040 performance shares under the Plan which are also included above. Performance sharesThe performance-based awards granted are based upon the Company’s performance over a three year period depending on the Company’s total shareholder return relative to a group of peer companies. Performance based nonvested sharesawards are recognized as compensation expense based on fair value on date of grant, the number of shares ultimately expected to vest and the vesting period. For accounting purposes, the performance shares are considered to have a market condition. The effect of the market condition is reflected in the grant date fair value of the award and thus, compensation expense is recognized on this type of award provided that the requisite service is rendered (regardless of whether the market condition is achieved). The Company estimated the fair value of each performance shareperformance-based award granted under the PlanPlans on the date of grant using a Monte Carlo simulation that uses the assumptions noted in Note 2.
During 2014,2016, compensation expense of $1.2$2.6 million (included in the $4.6$7.2 million discussed above) was recognized for the performance sharesawards granted in 2011, 20132014 and 2014.prior. The total unrecognized compensation cost related to non-vested performance sharesawards was $4.7$3.9 million at December 31, 20142016 and the weighted-average period over which this expense will be recognized is 2.41.6 years.
Deferred compensation plan for directors
Under the Deferred Compensation Plan for Directors, non-employee Directors may defer all or part of their Directors’ fees that are otherwise payable in cash. Directors’ fees that are deferred under this plan are credited to each Directors’ account under the plan in the form of Units. The number of Units credited is determined by dividing the amount of Directors’ fees deferred by the closing price of the Company’s Common Stock on the New York Stock Exchange on the day immediately preceding the day upon which Directors’ fees otherwise would be paid by the Company. A Director is credited with additional Units for dividends on the shares of Common Stock
represented by Units in such Directors’ Account. A Director may elect to receive the shares in a lump sum on a date specified by the Director or in quarterly or annual installments over a specified period and commencing on a specified date. The Directors may not elect to receive cash in lieu of shares. Under this plan there were a total of 45,50520,513 units outstanding at December 31, 2014.2016. Fees that were earned and credited to Directors’ accounts are recorded as compensation expense which totaled $0.1 million $0.1 millionannually in each of 2016, 2015, and $0.1 million in 2014, 2013 and 2012, respectively.2014.
11.10. RETIREMENT PLAN
Employees of the Company qualifying under certain age and service requirements are eligible to be a participant in a
401(k) Plan. TheIn 2015 and 2014, the Company contributescontributed to the Plan at the rate of 25% of the first 4% of gross wages that the employee contributes. Beginning on January 1, 2016, the Company contributes to the Plan at the rate of 33% of the first 5% of gross wages that the employee contributes. Total expense to the Company was approximately $192,000, $78,000,$505,000, $276,000, and $69,000$192,000 for the years ended December 31, 2014, 20132016, 2015 and 2012,2014, respectively.
12.11. INVESTMENT IN JOINT VENTURES
The Company has a 20% ownership interest in Sovran HHF Storage Holdings LLC (“Sovran HHF”), a joint venture that was formed in May 2008 to acquireowns 39 self-storage properties that are managed by the Company. The carrying value of the Company’s investment at December 31, 20142016 and 20132015 was $45.2$43.8 million and $17.4$44.6 million, respectively. Twenty-five properties were acquired by Sovran HHF in 2008 for approximately $171.5 million and 14 additional properties were acquired by Sovran HHF in 2014 for $187.2 million. In 2008, the Company contributed $18.6 million to the joint venture as its share of capital required to fund the acquisitions. In 2012 the Company contributed an additional $1.2 million to the joint venture. In 2013 the Company received a return of capital distribution of $3.4 million as part of the refinancing of Sovran HHF. In 2014, the Company contributed an additional $28.6 million in cash to the joint venture as its share of capital required to fund property acquisitions. In 2015 the Company contributed an additional $0.4 million in cash to the joint venture as its share of capital required to fund certain capital expenditures and property taxes related to 2014 acquisitions. As of
December 31, 2014,2016, the carrying value of the Company’s investment in Sovran HHF exceeds its share of the underlying equity in net assets of Sovran HHF by approximately $1.7 million as a result of the capitalization of certain acquisition related costs in 2008. This difference is included in the carrying value of the investment, which is assessed for other-than-temporary impairment on a periodic basis. No other-than-temporary impairments have been recorded on this investment.
The Company has a 15% ownership interest in Sovran HHF Storage Holdings II LLC (“Sovran HHF II”), a joint venture that was formed in 2011 to acquireowns 30 self-storage properties that are managed by the Company. The carrying value of the Company’s investment at December 31, 20142016 and 20132015 was $12.6$13.5 million and $13.0,$13.9 million, respectively. Twenty properties were acquired by Sovran HHF II during 2011 for approximately $166.1 million. During 2011,In 2015 the Company contributed $12.8$1.7 million in cash to the joint venture as its share of capital required to fund the acquisitions. Ten additional properties were acquired by Sovran HHF II during 2012 for approximately $29 million. During 2012, the Company contributed $2.4 million to the joint venture as its sharepayoff of capital required to fund the acquisitions.a mortgage note. The carrying value of this investment is assessed for other-than-temporary impairment on a periodic basis and no such impairments have been recorded on this investment.
As manager of Sovran HHF and Sovran HHF II, the Company earns a management and call center fee of 7% of gross revenues which totaled $4.9 million, $4.9 million, and $3.9 million $3.4 million,for 2016, 2015, and $3.0 million for 2014, 2013, and 2012, respectively. The Company also received an acquisition fee of $0.4 million and $0.1 million for securing purchases for Sovran HHF and Sovran HHF II in 2014 and 2012, respectively.2014. The Company’s share of Sovran HHF and Sovran HHF II’s income for 2016, 2015, and 2014 2013 and 2012 was $1.9$3.4 million, $1.9$3.2 million, and $0.9$1.9 million, respectively.
The Company also has a 49% ownership interest in Iskalo Office Holdings, LLC, which owns the building that houses the Company’s headquarters and other tenants. The carrying value of the Company’s investment is a liability of $0.5$0.4 million and $0.5 million at December 31, 20142016 and 2013,2015, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets. For the years ended December 31, 2014, 2013,2016, 2015, and 2012,2014, the Company’s share of Iskalo Office Holdings, LLC’s income (loss) was $107,000, $59,000,$214,000, $189,000, and ($18,000),$107,000, respectively. The Company paid rent to Iskalo Office Holdings, LLC of $1.2 million, $1.1 million, and $1.0 million $0.8in 2016, 2015, and 2014, respectively.
The Company holds an 85% equity interest in Urban Box Coralway Storage, LLC (Urban Box), a joint venture with an unrelated third party. Urban Box was formed in 2015 and is currently developing a self-storage property in Florida. During 2015, the Company contributed $4.0 million to Urban Box as its share of capital to develop the property, which primarily consists of the acquisition of land in 2015. In 2016, Urban Box entered into a non-recourse mortgage loan in order to finance future development costs. The Company and the other joint venture member have participation rights which require the agreement of both members in order to implement the activities of Urban Box which are most significant to its economic performance. Accordingly, the investment is accounted for by the Company using the equity method.
The Company will perform property management services for Urban Box in exchange for a management fee based on 6% of property revenues. There were no management fees in 2016 or 2015.
The Company holds a 5% equity interest in SNL/Orix 1200 McDonald Ave., LLC (“McDonald”), a joint venture with an unrelated third party. The joint venture for McDonald was executed in 2016 and is currently developing a self-storage property in New York. During 2016, the Company contributed $0.4 million of common capital and $2.3 million of preferred capital to McDonald as its share of capital to develop the property. McDonald entered into a non-recourse mortgage loan in order to finance the future development costs. In accordance with the terms of the McDonald joint venture agreement, the Company has the ability to assert influence over certain business matters. Accordingly, the investment is accounted for by the Company using the equity method.
The Company will perform property management services for McDonald in exchange for a management fee based on property revenues. There were no management fees in 2016.
The Company holds a 5% equity interest in SNL Orix Merrick, LLC (“Merrick”), a joint venture with an unrelated third party. The joint venture for Merrick was executed in 2016 and is currently developing a self-storage property in New York. During 2016, the Company contributed $0.4 million of common capital and $2.1 million of preferred capital to Merrick as its share of capital to develop the property. Merrick will enter into a non-recourse mortgage loan in order to finance the future development costs. In accordance with the terms of the Merrick joint venture agreement, the Company has the ability to assert influence over certain business matters. Accordingly, the investment is accounted for by the Company using the equity method.
The Company will perform property management services for Merrick in exchange for a management fee based on property revenues. There were no management fees in 2016.
The Company holds a 20% ownership interest in 191 III Holdings LLC (“191 III”), a joint venture that was formed in 2016 to acquire self-storage properties that are managed by the Company. During 2016, the Company contributed $0.7 million to 191 III as its share of capital to fund future acquisitions. In accordance with the terms of the 191 III joint venture agreement, the Company has the ability to assert influence over certain business matters. Accordingly, the investment is accounted for by the Company using the equity method.
The Company will perform property management and call center services for 191 III in 2014, 2013, and 2012, respectively.exchange for an aggregate fee based on 7% of the gross revenues of the joint venture. There were no management fees in 2016.
A summary of the combined unconsolidated joint ventures’ financial statements as of and for the year ended December 31, 20142016 is as follows:
(dollars in thousands) | Sovran HHF Storage Holdings LLC | Sovran HHF Storage Holdings II LLC | Iskalo Office Holdings, LLC | |||||||||||||
Balance Sheet Data: | ||||||||||||||||
Investment in storage facilities, net | $ | 341,817 | $ | 185,214 | $ | — | $ | 534,719 | ||||||||
Investment in office building | — | — | 5,005 | 5,008 | ||||||||||||
Other assets | 5,408 | 3,711 | 3,386 | 17,440 | ||||||||||||
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Total Assets | $ | 347,225 | $ | 188,925 | $ | 8,391 | $ | 557,167 | ||||||||
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Due to the Company | $ | 260 | $ | 333 | $ | — | $ | 1,223 | ||||||||
Mortgages payable | 124,888 | 102,884 | 9,267 | 220,456 | ||||||||||||
Other liabilities | 4,651 | 1,792 | 402 | 7,394 | ||||||||||||
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Total Liabilities | 129,799 | 105,009 | 9,669 | 229,073 | ||||||||||||
Unaffiliated partners’ equity | 262,944 | |||||||||||||||
Company equity | 65,150 | |||||||||||||||
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Unaffiliated partners’ equity (deficiency) | 173,941 | 71,335 | (729 | ) | ||||||||||||
Company equity (deficiency) | 43,485 | 12,581 | (549 | ) | ||||||||||||
Total Partners’ Equity | 328,094 | |||||||||||||||
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Total Partners’ Equity (Deficiency) | 217,426 | 83,916 | (1,278 | ) | ||||||||||||
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Total Liabilities and Partners’ Equity (Deficiency) | $ | 347,225 | $ | 188,925 | $ | 8,391 | ||||||||||
Total Liabilities and Partners’ Equity | $ | 557,167 | ||||||||||||||
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Income Statement Data: | ||||||||||||||||
Total revenues | $ | 26,508 | $ | 28,502 | $ | 1,405 | $ | 74,034 | ||||||||
Property operating expenses | (8,336 | ) | (9,809 | ) | (571 | ) | (23,879 | ) | ||||||||
Administrative, management and call center fees | (1,954 | ) | (2,113 | ) | — | (5,389 | ) | |||||||||
Acquisition costs | (1,837 | ) | — | — | ||||||||||||
Depreciation and amortization of customer list | (5,099 | ) | (4,163 | ) | (236 | ) | (13,946 | ) | ||||||||
Amortization of financing fees | (190 | ) | (203 | ) | (14 | ) | (354 | ) | ||||||||
Income tax expense | (151 | ) | (461 | ) | — | (232 | ) | |||||||||
Interest expense | (4,475 | ) | (5,142 | ) | (365 | ) | (10,258 | ) | ||||||||
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Net income | $ | 4,466 | $ | 6,611 | $ | 219 | $ | 19,976 | ||||||||
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The Company does not guarantee the debt of Sovran HHF, Sovran HHF II, or Iskalo Office Holdings, LLC.LLC, Urban Box, McDonald, Merrick, or 191 III.
We do not expect to have material future cash outlays relating to these joint ventures outside our share of capital for future acquisitions of properties. A summary of our revenues, expenses and cash flows arising from the off-balance sheet arrangements with Sovran HHF, Sovran HHF II, and Iskalo Office Holdings, LLC, Urban Box, McDonald, Merrick, and 191 III for the three years ended December 31, 20142016 are as follows:
Year ended December 31, | ||||||||||||
(dollars in thousands) | 2014 | 2013 | 2012 | |||||||||
Statement of Operations | ||||||||||||
Other operating income (management fees and acquisition fee income) | $ | 4,231 | $ | 3,358 | $ | 3,177 | ||||||
General and administrative expenses (corporate office rent) | 1,023 | 811 | 704 | |||||||||
Equity in income (losses) of joint ventures | 2,086 | 1,948 | 936 | |||||||||
Distributions from unconsolidated joint ventures | 3,123 | 2,630 | 2,184 | |||||||||
Receipts from (advances to) joint ventures | 590 | (27 | ) | (242 | ) | |||||||
Investing activities | ||||||||||||
Investment in unconsolidated joint ventures | (28,650 | ) | (4,237 | ) | (3,571 | ) | ||||||
Return of capital from unconsolidated joint ventures | — | 7,360 | — |
Year ended December 31, | ||||||||||||
(dollars in thousands) | 2016 | 2015 | 2014 | |||||||||
Statement of Operations | ||||||||||||
Other operating income (management fees and acquisition fee income) | $ | 4,891 | $ | 4,889 | $ | 4,231 | ||||||
General and administrative expenses (corporate office rent) | 1,214 | 1,053 | 1,023 | |||||||||
Equity in income of joint ventures | 3,665 | 3,405 | 2,086 | |||||||||
Distributions from unconsolidated joint ventures | 5,207 | 4,821 | 3,123 | |||||||||
(Advances to) receipts from joint ventures | (294 | ) | (346 | ) | 590 | |||||||
Investing activities | ||||||||||||
Investment in unconsolidated joint ventures | (6,438 | ) | (6,151 | ) | (28,650 | ) |
13.12. SHAREHOLDERS’ EQUITY
On March 3, 2015, the Company completed the public offering of 1,380,000 shares of its common stock at $90.40 per share. Net proceeds to the Company after deducting underwriting discounts and commissions and offering expenses were approximately $119.5 million. The Company used the net proceeds from the offering to repay a portion of the indebtedness then outstanding on the Company’s unsecured line of credit.
On January 20, 2016, the Company completed the public offering of 2,645,000 shares of its common stock at $105.75 per share. Net proceeds to the Company after deducting underwriting discounts and commissions and offering expenses were approximately $269.7 million. The Company used the net proceeds from the offering to repay a portion of the indebtedness then outstanding on the Company’s unsecured line of credit.
On May 25, 2016, the Company completed the public offering of 6,900,000 shares of its common stock at $100.00 per share. Net proceeds to the Company after deducting underwriting discounts and commissions and offering expenses were approximately $665.4 million. The Company initially used the net proceeds from the offering to repay the indebtedness then outstanding on the Company’s unsecured line of credit. The proceeds from this offering and the proceeds from the 2026 Senior Notes (see Note 5) were used, along with draws on the Company’s revolving line of credit, to fund the purchase of LS on July 15, 2016 (see Note 4).
On May 12, 2014, the Company entered into a continuous equity offering program (“Equity Program”) with Wells Fargo Securities, LLC (“Wells Fargo”), Jefferies LLC (“Jefferies”), SunTrust Robinson Humphrey, Inc. (“SunTrust”), Piper Jaffray & Co. (“Piper”), HSBC Securities (USA) Inc. (“HSBC”), and BB&T Capital Markets, a division of BB&T Securities, LLC (“BB&T”), pursuant to which the Company may sell from time to time up to $225 million in aggregate offering price of shares of the Company’s common stock. Actual sales under the Equity Program will depend on a variety of factors and conditions, including, but not limited to, market conditions, the trading price of the Company’s common stock, and determinations of the appropriate sources of funding for the Company. The Company expects to continue to offer, sell, and issue shares of common stock under the Equity Program from time to time based on various factors and conditions, although the Company is under no obligation to sell any shares under the Equity Program.
During 2016, the Company did not issue any shares of common stock under the Equity Program. As of December 31, 2016, the Company had $59.3 million available for issuance under the Equity Program which expires in May 2017.
During 2015, the Company issued 949,911 shares of common stock under the Equity Program at a weighted average issue price of $96.80 per share, generating net proceeds of $90.6 million after deducting $1.1 million of sales commissions paid to Jefferies, Piper, and HSBC, as well as other expenses of $0.2 million. The Company used the proceeds from the equity programs to fund a portion of the acquisition of 27 storage facilities.
During 2014, the Company issued 924,403 shares of common stock under the Equity Program at a weighted average issue price of $79.77 per share, generating net proceeds of $72.8 million after deducting $0.9 million of sales commissions paid to Piper, HSBC and BB&T. As of December 31, 2014, the Company had $151.3 million available for issuance under the Equity Program.
During the three months ended March 31, 2014, the Company issued 359,102 shares of common stock under a previous equity program at a weighted average issue price of $74.32 per share, generating net proceeds of $26.4 million after deducting $0.3 million of sales commissions payable to SunTrust.
In addition to sales commissions, the Company incurred expenses of $0.2 million in connection with these equity programs during 2014. The Company used the proceeds from the equity programs to fund a portion of the acquisition of 33 storage facilities.
In 2013, the Company implemented a Dividend Reinvestment Plan. The Company issued 171,854133,666 and 151,246 shares under the plan in 2014.2016 and 2015, respectively.
14.13. SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of quarterly results of Life Storage Inc. operations for the years ended December 31, 20142016 and 20132015 (dollars in thousands, except per share data):
2014 Quarter Ended | 2016 Quarter Ended | |||||||||||||||||||||||||||||||
March 31 | June 30 | Sept. 30 | Dec. 31 | Mar. 31 | Jun. 30 | Sept. 30 | Dec. 31 | |||||||||||||||||||||||||
Operating revenue | $ | 75,457 | $ | 80,444 | $ | 85,249 | $ | 84,930 | $ | 99,124 | $ | 107,005 | $ | 127,801 | $ | 128,678 | ||||||||||||||||
Income from continuing operations | 16,775 | 20,701 | 25,743 | 25,838 | ||||||||||||||||||||||||||||
Income from discontinued operations | — | — | — | — | ||||||||||||||||||||||||||||
Net Income | 16,775 | 20,701 | 25,743 | 25,838 | ||||||||||||||||||||||||||||
Net income attributable to common shareholders | 16,673 | 20,576 | 25,589 | 25,693 | ||||||||||||||||||||||||||||
Net Income Per Share Attributable to Common Shareholders | ||||||||||||||||||||||||||||||||
Net income (loss) | 28,230 | 43,504 | (4,969 | ) | 18,191 | |||||||||||||||||||||||||||
Net income (loss) attributable to common shareholders | 28,339 | 43,456 | (4,738 | ) | 18,168 | |||||||||||||||||||||||||||
Net income (loss) per share attributable to common shareholders | ||||||||||||||||||||||||||||||||
Basic | $ | 0.51 | $ | 0.63 | $ | 0.77 | $ | 0.76 | $ | 0.74 | $ | 1.04 | $ | (0.10 | ) | $ | 0.39 | |||||||||||||||
Diluted | $ | 0.51 | $ | 0.62 | $ | 0.77 | $ | 0.76 | $ | 0.73 | $ | 1.03 | $ | (0.10 | ) | $ | 0.39 | |||||||||||||||
2015 Quarter Ended | ||||||||||||||||||||||||||||||||
Mar. 31 | Jun. 30 | Sept. 30 | Dec. 31 | |||||||||||||||||||||||||||||
Operating revenue | $ | 85,408 | $ | 90,726 | $ | 95,428 | $ | 95,040 | ||||||||||||||||||||||||
Net income | 22,557 | 28,676 | 31,661 | 30,183 | ||||||||||||||||||||||||||||
Net income attributable to common shareholders | 22,451 | 28,532 | 31,504 | 30,037 | ||||||||||||||||||||||||||||
Net income per share attributable to common shareholders | ||||||||||||||||||||||||||||||||
Basic | $ | 0.65 | $ | 0.81 | $ | 0.88 | $ | 0.83 | ||||||||||||||||||||||||
Diluted | $ | 0.65 | $ | 0.80 | $ | 0.88 | $ | 0.83 |
Operating revenue (a) Income from continuing operations (a) Income from discontinued operations (a) Net Income Net income attributable to common shareholders Net Income Per Share Attributable to Common Shareholders Basic Diluted 2013 Quarter Ended March 31 June 30 Sept. 30 Dec. 31 $ 63,878 $ 67,109 $ 70,455 $ 72,065 14,204 17,816 19,552 19,900 168 236 247 2,472 14,372 18,052 19,799 22,371 14,280 17,937 19,675 22,234 $ 0.47 $ 0.57 $ 0.63 $ 0.70 $ 0.47 $ 0.57 $ 0.62 $ 0.69
The following is a summary of quarterly results of Life Storage LP operations for the years ended December 31, 2016 and 2015 (dollars in thousands, except per share data):
2016 Quarter Ended | ||||||||||||||||
Mar. 31 | Jun. 30 | Sept. 30 | Dec. 31 | |||||||||||||
Operating revenue | $ | 99,124 | $ | 107,005 | $ | 127,801 | $ | 128,678 | ||||||||
Net income (loss) | 28,230 | 43,504 | (4,969 | ) | 18,191 | |||||||||||
Net income (loss) attributable to common unitholders | 28,339 | 43,456 | (4,738 | ) | 18,168 | |||||||||||
Net income (loss) per unit attributable to common unitholders | ||||||||||||||||
Basic | $ | 0.74 | $ | 1.04 | $ | (0.10 | ) | $ | 0.39 | |||||||
Diluted | $ | 0.73 | $ | 1.03 | $ | (0.10 | ) | $ | 0.39 | |||||||
2015 Quarter Ended | ||||||||||||||||
Mar. 31 | Jun. 30 | Sept. 30 | Dec. 31 | |||||||||||||
Operating revenue | $ | 85,408 | $ | 90,726 | $ | 95,428 | $ | 95,040 | ||||||||
Net income | 22,557 | 28,676 | 31,661 | 30,183 | ||||||||||||
Net income attributable to common unitholders | 22,451 | 28,532 | 31,504 | 30,037 | ||||||||||||
Net income per unit attributable to common unitholders | ||||||||||||||||
Basic | $ | 0.65 | $ | 0.81 | $ | 0.88 | $ | 0.83 | ||||||||
Diluted | $ | 0.65 | $ | 0.80 | $ | 0.88 | $ | 0.83 |
15.See note 4 for a discussion of property acquisitions made during 2016 and the depreciation resulting from the change in estimated useful lives of Uncle Bob’s Self Storage® signage. See note 6 for financing transactions entered into in 2016.
14. COMMITMENTS AND CONTINGENCIES
The Company’s current practice is to conduct environmental investigations in connection with property acquisitions. At this time, the Company is not aware of any environmental contamination of any of its facilities that individually or in the aggregate would be material to the Company’s overall business, financial condition, or results of operations.
Future minimum lease payments on the lease of the four storage facilities, a building lease and the lease of the Company’s headquarters are as follows (dollars in thousands):
Four Storage Facilities | Building Lease | Corporate Headquarters | Total | |||||||||||||
2015 | $ | 537 | $ | 48 | $ | 896 | $ | 1,481 | ||||||||
2016 | — | 48 | 914 | 962 | ||||||||||||
2017 | — | 48 | 924 | 972 | ||||||||||||
2018 | — | 48 | 924 | 972 | ||||||||||||
2019 | — | 51 | 924 | 975 | ||||||||||||
Thereafter | — | 211 | 3,167 | 3,378 | ||||||||||||
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Total | $ | 537 | $ | 454 | $ | 7,749 | $ | 8,740 |
On November 1, 2013, the Company completed certain transactions with respect to the lease of four self storage facilities in New York and Connecticut with annual lease payments of $6 million with a provision for 4% annual increases, and an exclusive option to purchase the facilities for $120 million. The leases commenced November 1, 2013 and run through December 31, 2028. The Company has an option to purchase the facilities during the period from February 2, 2015 through September 2, 2016. The operating results of the leased facilities have been included in the Company’s operations since November 1, 2013. On November 10, 2014, the Company exercised its option to purchase the facilities and the purchase transaction closed on February 2, 2015.
Year ending December 31: | ||||
2017 | $ | 2,432 | ||
2018 | 2,332 | |||
2019 | 2,227 | |||
2020 | 2,278 | |||
2021 | 2,288 | |||
Thereafter | 13,431 | |||
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Total | $ | 24,988 |
At December 31, 2014,2016, the Company was under contract to acquire sevenfive self-storage facilities for cash consideration of approximately $143.7$67.0 million. FiveOne of the properties werewas acquired in February 20152017 from an unrelated partiesparty for $126.8 million, which included the four properties operated by the Company under a lease agreement.$9.8 million. The Company has not yet determined the assignment of the purchase pricesprice of these five facilitiesthis facility to the individual assets acquired. These acquisitions wereThis acquisition was funded with drawsa draw on the Company’s revolving line of credit. The line of credit balance outstanding after the funding of the five acquisitions was $187 million. The following is a summary of the 2015 acquisitionsproperties under contract at December 31, 2016 (dollars in thousands):.
State | Number of Properties | Date of Acquisition | Purchase Price | |||||||||
New York, Connecticut | 4 | 2/2/2015 | $ | 120,000 | ||||||||
Illinois | 1 | 2/5/2015 | 6,800 | |||||||||
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Total acquired 2015 | 5 | $ | 126,800 |
State | No. of Properties | Contract Amount | Acquisition Date | |||||||||
Illinois* | 1 | $ | 9,800 | Feb. 2017 | ||||||||
North Carolina* | 1 | 12,425 | ||||||||||
Texas* | 3 | 44,800 | ||||||||||
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5 | $ | 67,025 |
* | Properties purchased or expected to be purchased upon completion of construction. |
The purchase of the remaining facilities by the Company is subject to customary conditions to closing, and there is no assurance that these facilities will be acquired.
At December 31, 2016, 191 III was under contract to acquire five self-storage facilities for cash consideration of $109.5 million. Four of these facilities were acquired by 191 III in January 2017. The Company’s cash contribution to 191 III for the purchase of the four facilities was approximately $15.0 million. 191 III is under contract to purchase the remaining facility for $32.3 million of which the company is committed to contribute $6.5 million. The purchase of this remaining facility by 191 III is subject to customary conditions to closing, and there is no assurance that this facility will be acquired.
At December 31, 2014,2016, the Company has signed contracts in place with third party contractors for expansion and enhancements at its existing facilities. The Company expects to pay $10.1$11.6 million under these contracts in 2015.2017.
On or about August 25, 2014, a putative class action was filed against the Company in the Superior Court of New Jersey Law Division Burlington County. The action seeks to obtain declaratory, injunctive and monetary relief for a class of consumers based upon alleged violations by the Company of the New Jersey Truth in Customer Contract, Warranty and Notice Act, the New Jersey Consumer Fraud Act and the New Jersey Insurance Producer Licensing Act. On October 17, 2014, the action was removed from the Superior Court of New Jersey Law Division Burlington County to the United States District Court for the District of New Jersey. The Company brought a motion to partially dismiss the complaint for failure to state a claim, and on July 16, 2015, the Company’s motion was granted in part and denied in part. On October 20, 2016, the complaint was amended to add a claim that the Company’s insurance program violates New Jersey consumer protection laws. The Company intends to vigorously defend the action, and the possibility of any adverse outcome cannot be determined at this time.
16.15. SUBSEQUENT EVENTS
On January 5, 2015,4, 2017, the Company declared a quarterly dividend of $0.75$0.95 per common share. The dividend was paid on January 26, 20152017 to shareholders of record on January 16, 2015.17, 2017. The total dividend paid amounted to $25.5$44.1 million.
In January 2017, the Company executed a joint venture agreement, Review Avenue Partners, LLC (“RAP”), with an unrelated third party. The Company holds a 40% interest in RAP and contributed $12.4 million of common capital to RAP on January 4, 2017. RAP is currently operating a self-storage property in New York and has entered into a non-recourse mortgage loan to finance a portion of the cost of the facility. The Company will perform property management services for RAP in exchange for a management fee based on property revenues.
Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure |
None.
Item 9A. | Controls |
Controls and Procedures (Parent Company)
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
OurThe Parent Company’s management conducted an evaluation of the effectiveness of the design and operation of ourthe Parent Company’s disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), under the supervision of and with the participation of ourthe Parent Company’s management, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation, ourthe Parent Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that ourthe Parent Company’s disclosure controls and procedures were effective at December 31, 2014.2016. There have not been changes in the Parent Company’s internal controls or in other factors that could significantly affect these controls during the quarter ended December 31, 2014.2016.
Management’s Report on Life Storage, Inc. Internal Control Over Financial Reporting
Our managementManagement of Life Storage, Inc. (the “REIT”) is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2014. Internal2016. The REIT’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. OurThe REIT’s system of internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;REIT; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the companyREIT are being made only in accordance with authorizations of management and directors of the company;REIT; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’sREIT’s assets that could have a material effect on the financial statements.
OurThe REIT’s management performed an assessment of the effectiveness of ourthe REIT’s internal control over financial reporting as of December 31, 20142016 based upon criteria in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992(2013 Framework) (‘‘COSO’’(“COSO”). Based on our assessment, management determined that ourthe REIT’s internal control over financial reporting was effective as of December 31, 20142016 based on the criteria in Internal Control-Integrated Framework issued by COSO.
The effectiveness of the Company’sREIT’s internal control over financial reporting as of December 31, 20142016 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included in Item 9A herein.
/S/ David L. Rogers | /S/ Andrew J. Gregoire | |
Chief Executive Officer | Chief Financial Officer |
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Sovran SelfLife Storage, Inc.
We have audited Sovran SelfLife Storage, Inc.’s internal control over financial reporting as of December 31, 2014,2016, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992(2013 framework) (the COSO criteria). Sovran SelfLife Storage, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Life Storage, Inc. Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Sovran SelfLife Storage, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014,2016, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Sovran SelfLife Storage, Inc. as of December 31, 20142016 and 20132015, and the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 20142016 of Sovran SelfLife Storage, Inc. and our report dated February 24, 201527, 2017 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Buffalo, New York
February 27, 2017
Controls and Procedures (Operating Partnership)
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
The Operating Partnership’s management conducted an evaluation of the effectiveness of the design and operation of the Operating Partnership’s disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), under the supervision of and with the participation of the Operating Partnership’s management, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation, the Operating Partnership’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Operating Partnership’s disclosure controls and procedures were effective at December 31, 2016. There have not been changes in the Operating Partnership’s internal controls or in other factors that could significantly affect these controls during the quarter ended December 31, 2016.
Management’s Report on Life Storage LP Internal Control Over Financial Reporting
Management of Life Storage LP (the “Partnership”) is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2016. The Partnership’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Partnership’s system of internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Partnership are being made only in accordance with authorizations of management and directors of the Partnership; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Partnership’s assets that could have a material effect on the financial statements.
The Partnership’s management performed an assessment of the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2016 based upon criteria in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (“COSO”). Based on our assessment, management determined that the Partnership’s internal control over financial reporting was effective as of December 31, 2016 based on the criteria in Internal Control-Integrated Framework issued by COSO.
The effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2016 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included in Item 9A herein.
/S/ Andrew J. Gregoire | ||
Officer Chief Financial Officer |
Report of Independent Registered Public Accounting Firm
The Board of Directors and Partners of Life Storage LP
We have audited Life Storage LP’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Life Storage LP’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Life Storage LP Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Life Storage LP maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the COSO criteriaItem 9B. OtherInformation.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Life Storage LP as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income, partners’ capital and cash flows for each of the three years in the period ended December 31, 2016 of Life Storage LP and our report dated February 27, 2017 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Buffalo, New York
February 27, 2017
Item 9B. | Other Information |
None.
Item 10. | Directors, |
The information contained in ourthe Parent Company’s Proxy Statement for the 20152017 Annual Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 20142016 (“20152017 Proxy Statement”), with respect to directors, executive officers, audit committee, and audit committee financial experts of the Company and Section 16(a) beneficial ownership reporting compliance, is incorporated herein by reference in response to this item.
The Company has adopted a code of ethics that applies to all of its directors, officers, and employees. The Company has made the Code of Ethics available on its website at http://www.unclebobs.com.www.lifestorage.com.
Item 11. | Executive Compensation |
The information required is incorporated by reference to “Executive Compensation” and “Director Compensation” in the 20152017 Proxy Statement and is incorporated herein by reference.
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
The information required herein is incorporated by reference to “Stock Ownership By Directors and Executive Officers” and “Security Ownership of Certain Beneficial Owners” in the 20152017 Proxy Statement and is incorporated herein by reference.
Item 13. | Certain Relationships |
The information required herein is incorporated by reference to “Certain Transactions” and “Election of Directors—Director Independence” in the 20152017 Proxy Statement and is incorporated herein by reference.
Item 14. | Principal Accountant Fees and Services |
The information required herein is incorporated by reference to “Appointment of Independent Registered Public Accounting Firm” in the 20152017 Proxy Statement and is incorporated herein by reference.
Item 15. | Exhibits, Financial Statement Schedules |
(a) | Documents filed as part of this Annual Report on Form 10-K: |
1. | The following consolidated financial statements of |
(i) | Consolidated Balance Sheets as of December 31, | |||||
(ii) | Consolidated Statements of Operations for Years Ended December 31, | |||||
(iii) | Consolidated Statements of Comprehensive Income for Years Ended December 31, | |||||
(iv) | Consolidated Statements of Shareholders’ | |||||
(v) | Consolidated Statements of Cash Flows for Years Ended December 31, | |||||
(vi) | Notes to Consolidated Financial Statements. |
The following consolidated financial statements of Life Storage LP are included in Item 8. | ||||
(i) | Consolidated Balance Sheets as of December 31, 2016 and 2015. | |||
(ii) | Consolidated Statements of Operations for Years Ended December 31, 2016, 2015, and 2014. | |||
(iii) | Consolidated Statements of Comprehensive Income for Years Ended December 31, 2016, 2015, and 2014. | |||
(iv) | Consolidated Statements of Partners’ Capital for the Years Ended December 31, 2016, 2015, and 2014. | |||
(v) | Consolidated Statements of Cash Flows for Years Ended December 31, 2016, 2015, and 2014 and | |||
(vi) | Notes to Consolidated Financial Statements. | |||
2. | The following financial statement Schedule as of the period ended December 31, Schedule III Real Estate and Accumulated Depreciation at December 31, 2016. |
Schedule III Real Estate and Accumulated Depreciation.
All other Consolidated financial schedules are omitted because they are inapplicable, not required, or the information is included elsewhere in the consolidated financial statements or the notes thereto.
3. | Exhibits |
The exhibits required to be filed as part of this Annual Report on Form 10-K have been included as follows:
3.1 | Amended and Restated Articles of Incorporation of the | |
3.2 | Articles Supplementary to the Amended and Restated Articles of Incorporation of the the Parent Company’s Form 8-A filed December 3, 1996). | |
3.3 | Articles Supplementary to the Amended and Restated Articles of Incorporation of the the Parent Company’s Form 8-A filed July 29, 1999). | |
3.4 | Articles Supplementary to the Amended and Restated Articles of Incorporation of the | |
3.5 | Articles Supplementary to the Amended and Restated Articles of Incorporation of the | |
3.6 | ||
3.7 | Bylaws, as amended, of the Parent Company (incorporated by reference to Exhibit 3.2 to the Parent Company and the Operating Partnership’s Current Report on Form 8-K filed August 11, 2016). | |
3.8 | Amended and Restated Certificate of Limited Partnership (incorporated by reference to Exhibit 3.3 to the Parent Company and the Operating Partnership’s Current Report on Form 8-K filed August 11, 2016). | |
3.9 | Agreement of Limited Partnership of the Operating Partnership (incorporated by reference to Exhibit 3.1 on Form 10 filed April 22, 1998). |
3.10 | Amendments to the Agreement of Limited Partnership of the Operating Partnership dated July | |
3.11 | Amendment to Agreement of Limited Partnership of the Operating Partnership (incorporated by reference to Exhibit 3.4 to the Parent Company and the Operating Partnership’s Current Report on Form 8-K filed August 11, 2016). | |
4.1 | Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Form S-11 (File No. 33-91422) filed June 19, 1995). | |
Base Indenture, dated as of June 20, 2016, among the Company, the Operating Partnership and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.1 to the Parent Company and the Operating Partnership’s Current Report on Form 8-K filed June 20, 2016). | ||
First Supplemental Indenture, dated as of June 20, 2016, among the Parent Company, the Operating Partnership and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.2 to the Parent Company and the Operating Partnership’s Current Report on Form 8-K filed June 20, 2016). | ||
4.4 | Form of Note representing the Notes (incorporated by reference to Exhibit 4.3 to the Parent Company and the Operating Partnership’s Current Report on Form 8-K filed June 20, 2016). | |
4.5 | Form of Guarantee (included in Exhibit 4.4). | |
10.1*+ | 2015 Award and Option Plan, as amended. | |
10.2+ | 2005 Award and Option Plan, as amended (incorporated by reference to Exhibit 10.1 to | |
10.3+ | Employment Agreement between the | |
10.4+ | Amendment to Employment Agreement between the Exhibit 10.1 to | |
Amendment to Employment Agreement between the Parent Company, the Operating Partnership and Robert J Attea. | ||
10.6+ | Employment Agreement between the |
Amendment to Employment Agreement between the Exhibit 10.2 to | |||
Amendment to Employment Agreement between the Parent Company, the Operating Partnership and Kenneth J. Myszka. | |||
10.9+ | Employment Agreement between the | ||
Amendment to Employment Agreement between the Exhibit 10.3 to |
Amendment to Employment Agreement between the Parent Company, the Operating Partnership and David L. Rogers. | ||
10.12+ | Form of restricted stock grant pursuant to | |
Form of stock option grant pursuant to | ||
Form of Long Term Incentive Restricted Stock Award Notice pursuant to | ||
Form of Performance-Based Vesting Restricted Stock Award Notice pursuant to | ||
Deferred Compensation Plan for Directors (incorporated by reference to the Parent Company’s Schedule 14A Proxy Statement filed April | ||
Amended Indemnification Agreements with members of the Board of Directors and Executive Officers (incorporated by reference to Exhibit 10.35 and 10.36 to | ||
10.18 | Sixth Amended and Restated Revolving Credit and Term Loan Agreement dated as of December 10, 2014 among |
10.19 | Agreement Regarding Revolving Credit Commitment Increases andFirst Amendment to Credit Agreement dated January 4, 2016 among the Parent Company, the Operating Partnership, Manufacturers & Traders Trust Company, as Administrative Agent, and various other financial institutions (incorporated by reference to Exhibit 10.1 to the Parent Company’s Current Report on Form 8-K filed January 4, 2016). | ||
10.20 | Note Purchase Agreement dated as of August 5, 2011 among | ||
10.21 | Note Purchase Agreement dated as of April 8, 2014 among | ||
10.22 |
10.23 | ||
10.24 | ||
10.25 | ||
Equity Distribution Agreement dated as of May 12, 2014 by and among | ||
10.26 | Equity Distribution Agreement dated as of May 12, 2014 by and among the Parent Company, the Operating Partnership, Sovran Holdings, Inc. (n/k/a Life Storage Holdings, Inc.), and Jefferies LLC, as agent (incorporated by reference to Exhibit 1.2 to the Parent Company’s Current Report on Form 8-K filed May 12, 2014). | |
10.27 | Equity Distribution Agreement dated as of May 12, 2014 by and among | |
10.28 | Equity Distribution Agreement dated as of May 12, 2014 by and among | |
10.29 | Equity Distribution Agreement dated as of May 12, 2014 by and among |
Equity Distribution Agreement dated as of May 12, 2014 by and among | ||
Outside Director Fee Schedule (incorporated by reference to Exhibit 10.1 to | ||
Employment Agreement between |
Employment Agreement between | ||
Employment Agreement between | ||
Indemnification Agreement dated July 16, 2012 between | ||
Indemnification Agreement dated January 30, 2015 between | ||
Indemnification Agreement dated January 30, 2015 between | ||
Form of Long Term Incentive Restricted Stock Award Notice pursuant to |
10.41+ | Form of Performance-Based Vesting Restricted Stock Award Notice pursuant to 2005 Award and Option Plan (incorporated by reference to Exhibit 10.2 to the Parent Company’s Current Report on Form 8-K filed December 29, 2014). | |
10.42+ | Form of Long Term Incentive Restricted Stock Award Notice pursuant to 2015 Award and Option Plan (incorporated by reference to Exhibit 10.1 to the Parent Company’s Current Report on Form 8-K filed December 22, 2015). | |
10.43+ | Form of Performance-Based Award Notice pursuant to 2015 Award and Option Plan (incorporated by reference to Exhibit 10.2 to the Parent Company’s Current Report on Form 8-K filed December 22, 2015). | |
10.44 | Form of Long Term Incentive Restricted Stock Award Notice (incorporated by reference to Exhibit 10.1 to the Parent Company and the Operating Partnership’s Current Report on Form 8-K filed December 28, 2016). | |
10.45 | Form of Performance-Based Award Notice (incorporated by reference to Exhibit 10.2 to the Parent Company and the Operating Partnership’s Current Report on Form 8-K filed December 28, 2016). | |
10.46 | Agreement and Plan of Merger, by and among Life Storage, L.P., the Operating Partnership, Solar Lunar Sub, LLC, and Fortis Advisors LLC, as Sellers’ Representative dated as of May 18, 2016 (incorporated by reference to Exhibit 2.1 to the Parent Company’s Current Report on Form 8-K filed May 19, 2016). | |
12.1* | Statement Re: Computation of Earnings to Fixed | |
21.1* | Subsidiaries of the Company. | |
23.1* | Consent of Independent Registered Public Accounting | |
23.2* | Consent of Independent Registered Public Accounting Firm | |
24.1* | Powers of Attorney (included on signature pages). | |
31.1* | Certification of Chief Executive Officer of Life Storage, Inc. pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended. |
31.2* | Certification of Chief Financial Officer of Life Storage LP pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended. | |
Certification of Chief Executive Officer of Life Storage LP pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended. | ||
31.4* | Certification of Chief Financial Officer of Life Storage LP pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended. | |
32.1* | Certification of Chief Executive Officer and Chief Financial Officer of Life Storage, Inc. Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2* | Certification of Chief Executive Officer and Chief Financial Officer of Life Storage, Inc. Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101* | The following financial statements from the | |
(i) Consolidated Balance Sheets at December 31,
(ii) Consolidated Statements of Operations for Years Ended December 31,
(iii) Consolidated Statements of Comprehensive Income for Years Ended December 31,
(iv) Consolidated Statements of Shareholders’ Equity for Years Ended December 31,
(v) Consolidated Statements of Cash Flows for Years Ended December 31,
(vi) Notes to Consolidated Financial Statements | ||
The following financial statements from the Life Storage LP.’s Annual Report on Form 10-K for the year ended December 31, 2016, formatted in XBRL, as follows: (i) Consolidated Balance Sheets at December 31, 2016 and 2015; (ii) Consolidated Statements of Operations for Years Ended December 31, 2016, 2015, and 2014; (iii) Consolidated Statements of Comprehensive Income for Years Ended December 31, 2016, 2015, and 2014. (iv) Consolidated Statements of Partners’ Capital for Years Ended December 31, 2016, 2015, and 2014; (v) Consolidated Statements of Cash Flows for Years Ended December 31, 2016, 2015, and 2014; and | ||
(vi) Notes to Consolidated Financial Statements | ||
* | Filed herewith. | |
+ | Management contract or compensatory plan or arrangement. | |
Not applicable. |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
February 27, 2017 | ||||||
By: | /s/ Andrew J. Gregoire | |||||
Andrew J. Gregoire Chief Financial Officer (Principal Accounting Officer) | ||||||
February 27, 2017 | LIFE STORAGE LP | |||||
By: | /s/ Andrew J. Gregoire | |||||
Andrew J. Gregoire Chief Financial Officer | ||||||
(Principal Accounting Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature | Title | Date | ||||
/s/ Robert J. Attea Robert J. Attea | Executive Chairman
| February | ||||
27, 2017 | ||||||
/s/ Kenneth F. Myszka Kenneth F. Myszka | President and Director of Life Storage, Inc. and Life Storage Holdings, Inc., general partner of Life Storage LP | February | ||||
| 27, 2017 | |||||
/s/ David L. Rogers David L. Rogers | Chief Executive Officer (Principal Executive Officer) of Life Storage, Inc. and Life Storage Holdings, Inc., general partner of Life Storage LP | February | ||||
27, 2017 | ||||||
/s/ Andrew J. Gregoire Andrew J. Gregoire | Chief Financial Officer (Principal Financial and Accounting Officer) of Life Storage, Inc. and Life Storage Holdings, Inc., general partner of Life Storage LP | February | ||||
27, 2017 | ||||||
/s/ | ||||||
| Director of Life Storage, Inc. | February | ||||
27, 2017 | ||||||
/s/ Stephen R. Rusmisel Stephen R. Rusmisel | Director of Life Storage, Inc. | February | ||||
27, 2017 | ||||||
/s/ Arthur L. Havener, Jr. Arthur L. Havener, Jr. | Director of Life Storage, Inc. | February | ||||
27, 2017 | ||||||
/s/ Mark. G. Barberio Mark G. Barberio | Director of Life Storage, Inc. | February | ||||
27, 2017 |
Sovran SelfLife Storage, Inc.
Schedule III
Combined Real Estate and Accumulated Depreciation
(in thousands)
December 31, 20142016
Initial Cost to Company | Cost Capitalized Subsequent to Acquisition | Gross Amount at Which Carried at Close of Period | Life on which depreciation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Cost Capitalized Subsequent to Acquisition | Gross Amount at Which Carried at Close of Period | Encum | Building, Equipment and | Building, Equipment and | Building, Equipment and | Accum. | Date of | Date | in latest income statement | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Description | ST | Encum brance | Land | Building, Equipment and Impvmts | Building, Equipment and Impvmts | Land | Building, Equipment and Impvmts | Total | Accum. Deprec. | Date of Const. | Date Acquired | Life on which depr in latest income statement is computed | ST | brance | Land | Impvmts. | Impvmts. | Land | Impvmts. | Total | Deprec. | Const. | Acquired | is completed | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charleston | SC | $ | 416 | $ | 1,516 | $ | 2,194 | $ | 416 | $ | 3,710 | $ | 4,126 | $ | 1,378 | 1985 | 6/26/1995 | 5 to 40 years | SC | $ | 416 | $ | 1,516 | $ | 2,350 | $ | 416 | $ | 3,866 | $ | 4,282 | $ | 1,585 | 1985 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||
Lakeland | FL | 397 | 1,424 | 1,626 | 397 | 3,050 | 3,447 | 1,128 | 1985 | 6/26/1995 | 5 to 40 years | FL | 397 | 1,424 | 1,696 | 397 | 3,120 | 3,517 | 1,293 | 1985 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charlotte | NC | 308 | 1,102 | 3,394 | 747 | 4,057 | 4,804 | 1,016 | 1986 | 6/26/1995 | 5 to 40 years | NC | 308 | 1,102 | 3,508 | 747 | 4,171 | 4,918 | 1,256 | 1986 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Youngstown | OH | 239 | 1,110 | 2,444 | 239 | 3,554 | 3,793 | 1,112 | 1980 | 6/26/1995 | 5 to 40 years | OH | 239 | 1,110 | 2,531 | 239 | 3,641 | 3,880 | 1,329 | 1980 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cleveland | OH | 701 | 1,659 | 1,408 | 1,036 | 2,732 | 3,768 | 1,198 | 1987 | 6/26/1995 | 5 to 40 years | OH | 701 | 1,659 | 3,808 | 1,036 | 5,132 | 6,168 | 1,403 | 1987 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pt. St. Lucie | FL | 395 | 1,501 | 978 | 779 | 2,095 | 2,874 | 1,091 | 1985 | 6/26/1995 | 5 to 40 years | FL | 395 | 1,501 | 1,063 | 779 | 2,180 | 2,959 | 1,211 | 1985 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Orlando - Deltona | FL | 483 | 1,752 | 2,223 | 483 | 3,975 | 4,458 | 1,567 | 1984 | 6/26/1995 | 5 to 40 years | FL | 483 | 1,752 | 2,287 | 483 | 4,039 | 4,522 | 1,799 | 1984 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Middletown | NY | 224 | 808 | 957 | 224 | 1,765 | 1,989 | 845 | 1988 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NY Metro-Middletown | NY | 224 | 808 | 1,080 | 224 | 1,888 | 2,112 | 940 | 1988 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Buffalo | NY | 423 | 1,531 | 3,451 | 497 | 4,908 | 5,405 | 1,715 | 1981 | 6/26/1995 | 5 to 40 years | NY | 423 | 1,531 | 3,477 | 497 | 4,934 | 5,431 | 1,946 | 1981 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rochester | NY | 395 | 1,404 | 613 | 395 | 2,017 | 2,412 | 986 | 1981 | 6/26/1995 | 5 to 40 years | NY | 395 | 1,404 | 661 | 395 | 2,065 | 2,460 | 1,120 | 1981 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jacksonville | FL | 152 | 728 | 3,846 | 687 | 4,039 | 4,726 | 860 | 1985 | 6/26/1995 | 5 to 40 years | FL | 152 | 728 | 3,898 | 687 | 4,091 | 4,778 | 1,119 | 1985 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Columbia | SC | 268 | 1,248 | 637 | 268 | 1,885 | 2,153 | 904 | 1985 | 6/26/1995 | 5 to 40 years | SC | 268 | 1,248 | 777 | 268 | 2,025 | 2,293 | 1,020 | 1985 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Boston | MA | 363 | 1,679 | 791 | 363 | 2,470 | 2,833 | 1,145 | 1980 | 6/26/1995 | 5 to 40 years | MA | 363 | 1,679 | 854 | 363 | 2,533 | 2,896 | 1,282 | 1980 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rochester | NY | 230 | 847 | 2,237 | 234 | 3,080 | 3,314 | 679 | 1980 | 6/26/1995 | 5 to 40 years | NY | 230 | 847 | 2,323 | 234 | 3,166 | 3,400 | 862 | 1980 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Boston | MA | 680 | 1,616 | 600 | 680 | 2,216 | 2,896 | 1,074 | 1986 | 6/26/1995 | 5 to 40 years | MA | 680 | 1,616 | 874 | 680 | 2,490 | 3,170 | 1,199 | 1986 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Savannah | GA | 463 | 1,684 | 4,915 | 1,445 | 5,617 | 7,062 | 1,949 | 1981 | 6/26/1995 | 5 to 40 years | GA | 463 | 1,684 | 4,937 | 1,445 | 5,639 | 7,084 | 2,298 | 1981 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Greensboro | NC | 444 | 1,613 | 2,990 | 444 | 4,603 | 5,047 | 1,464 | 1986 | 6/26/1995 | 5 to 40 years | NC | 444 | 1,613 | 3,209 | 444 | 4,822 | 5,266 | 1,719 | 1986 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Raleigh-Durham | NC | 649 | 2,329 | 1,375 | 649 | 3,704 | 4,353 | 1,608 | 1985 | 6/26/1995 | 5 to 40 years | NC | 649 | 2,329 | 1,446 | 649 | 3,775 | 4,424 | 1,806 | 1985 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hartford-New Haven | CT | 387 | 1,402 | 3,911 | 387 | 5,313 | 5,700 | 1,179 | 1985 | 6/26/1995 | 5 to 40 years | CT | 387 | 1,402 | 3,971 | 387 | 5,373 | 5,760 | 1,452 | 1985 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Atlanta | GA | 844 | 2,021 | 914 | 844 | 2,935 | 3,779 | 1,370 | 1988 | 6/26/1995 | 5 to 40 years | GA | 844 | 2,021 | 972 | 844 | 2,993 | 3,837 | 1,515 | 1988 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Atlanta | GA | 302 | 1,103 | 640 | 303 | 1,742 | 2,045 | 808 | 1988 | 6/26/1995 | 5 to 40 years | GA | 302 | 1,103 | 684 | 303 | 1,786 | 2,089 | 899 | 1988 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Buffalo | NY | 315 | 745 | 3,962 | 517 | 4,505 | 5,022 | 1,062 | 1984 | 6/26/1995 | 5 to 40 years | NY | 315 | 745 | 4,039 | 517 | 4,582 | 5,099 | 1,307 | 1984 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Raleigh-Durham | NC | 321 | 1,150 | 778 | 321 | 1,928 | 2,249 | 912 | 1985 | 6/26/1995 | 5 to 40 years | NC | 321 | 1,150 | 861 | 321 | 2,011 | 2,332 | 1,029 | 1985 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Columbia | SC | 361 | 1,331 | 774 | 374 | 2,092 | 2,466 | 1,036 | 1987 | 6/26/1995 | 5 to 40 years | SC | 361 | 1,331 | 924 | 374 | 2,242 | 2,616 | 1,168 | 1987 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Columbia | SC | 189 | 719 | 1,138 | 189 | 1,857 | 2,046 | 851 | 1989 | 6/26/1995 | 5 to 40 years | SC | 189 | 719 | 1,192 | 189 | 1,911 | 2,100 | 975 | 1989 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Columbia | SC | 488 | 1,188 | 1,942 | 488 | 3,130 | 3,618 | 981 | 1986 | 6/26/1995 | 5 to 40 years | SC | 488 | 1,188 | 2,097 | 488 | 3,285 | 3,773 | 1,169 | 1986 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Atlanta | GA | 430 | 1,579 | 2,245 | 602 | 3,652 | 4,254 | 1,331 | 1988 | 6/26/1995 | 5 to 40 years | GA | 430 | 1,579 | 2,323 | 602 | 3,730 | 4,332 | 1,511 | 1988 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Orlando | FL | 513 | 1,930 | 764 | 513 | 2,694 | 3,207 | 1,340 | 1988 | 6/26/1995 | 5 to 40 years | FL | 513 | 1,930 | 813 | 513 | 2,743 | 3,256 | 1,483 | 1988 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sharon | PA | 194 | 912 | 560 | 194 | 1,472 | 1,666 | 700 | 1975 | 6/26/1995 | 5 to 40 years | PA | 194 | 912 | 572 | 194 | 1,484 | 1,678 | 776 | 1975 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ft. Lauderdale | FL | 1,503 | 3,619 | 1,012 | 1,503 | 4,631 | 6,134 | 2,003 | 1985 | 6/26/1995 | 5 to 40 years | FL | 1,503 | 3,619 | 1,233 | 1,503 | 4,852 | 6,355 | 2,253 | 1985 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
West Palm | FL | 398 | 1,035 | 392 | 398 | 1,427 | 1,825 | 765 | 1985 | 6/26/1995 | 5 to 40 years | FL | 398 | 1,035 | 502 | 398 | 1,537 | 1,935 | 851 | 1985 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Atlanta | GA | 423 | 1,015 | 533 | 424 | 1,547 | 1,971 | 770 | 1989 | 6/26/1995 | 5 to 40 years | GA | 423 | 1,015 | 574 | 424 | 1,588 | 2,012 | 861 | 1989 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Atlanta | GA | 483 | 1,166 | 1,171 | 483 | 2,337 | 2,820 | 959 | 1988 | 6/26/1995 | 5 to 40 years | GA | 483 | 1,166 | 1,253 | 483 | 2,419 | 2,902 | 1,102 | 1988 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Atlanta | GA | 308 | 1,116 | 718 | 308 | 1,834 | 2,142 | 939 | 1986 | 6/26/1995 | 5 to 40 years | GA | 308 | 1,116 | 794 | 308 | 1,910 | 2,218 | 1,022 | 1986 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Atlanta | GA | 170 | 786 | 811 | 174 | 1,593 | 1,767 | 738 | 1981 | 6/26/1995 | 5 to 40 years | GA | 170 | 786 | 856 | 174 | 1,638 | 1,812 | 824 | 1981 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Atlanta | GA | 413 | 999 | 777 | 413 | 1,776 | 2,189 | 941 | 1975 | 6/26/1995 | 5 to 40 years | GA | 413 | 999 | 808 | 413 | 1,807 | 2,220 | 1,032 | 1975 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Baltimore | MD | 154 | 555 | 1,469 | 306 | 1,872 | 2,178 | 729 | 1984 | 6/26/1995 | 5 to 40 years | MD | 154 | 555 | 1,473 | 306 | 1,876 | 2,182 | 840 | 1984 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Baltimore | MD | 479 | 1,742 | 2,906 | 479 | 4,648 | 5,127 | 1,643 | 1988 | 6/26/1995 | 5 to 40 years | MD | 479 | 1,742 | 2,978 | 479 | 4,720 | 5,199 | 1,904 | 1988 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Melbourne | FL | 883 | 2,104 | 1,721 | 883 | 3,825 | 4,708 | 1,788 | 1986 | 6/26/1995 | 5 to 40 years | FL | 883 | 2,104 | 2,026 | 883 | 4,130 | 5,013 | 2,007 | 1986 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Newport News | VA | 316 | 1,471 | 973 | 316 | 2,444 | 2,760 | 1,152 | 1988 | 6/26/1995 | 5 to 40 years | VA | 316 | 1,471 | 1,016 | 316 | 2,487 | 2,803 | 1,293 | 1988 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pensacola | FL | 632 | 2,962 | 1,558 | 651 | 4,501 | 5,152 | 2,226 | 1983 | 6/26/1995 | 5 to 40 years | FL | 632 | 2,962 | 1,649 | 651 | 4,592 | 5,243 | 2,472 | 1983 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hartford | CT | 715 | 1,695 | 1,243 | 715 | 2,938 | 3,653 | 1,301 | 1988 | 6/26/1995 | 5 to 40 years | CT | 715 | 1,695 | 1,383 | 715 | 3,078 | 3,793 | 1,461 | 1988 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Atlanta | GA | 304 | 1,118 | 2,759 | 619 | 3,562 | 4,181 | 1,330 | 1988 | 6/26/1995 | 5 to 40 years | GA | 304 | 1,118 | 2,820 | 619 | 3,623 | 4,242 | 1,526 | 1988 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Alexandria | VA | 1,375 | 3,220 | 2,836 | 1,376 | 6,055 | 7,431 | 2,919 | 1984 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pensacola | FL | 244 | 901 | 658 | 244 | 1,559 | 1,803 | 871 | 1986 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Melbourne | FL | 834 | 2,066 | 3,483 | 1,591 | 4,792 | 6,383 | 1,518 | 1986 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hartford | CT | 234 | 861 | 3,486 | 612 | 3,969 | 4,581 | 1,205 | 1992 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Atlanta | GA | 256 | 1,244 | 2,231 | 256 | 3,475 | 3,731 | 1,501 | 1988 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Norfolk | VA | 313 | 1,462 | 2,657 | 313 | 4,119 | 4,432 | 1,485 | 1984 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Norfolk - Virginia Beach | VA | 1,142 | 4,998 | 3,411 | 1,142 | 8,409 | 9,551 | 3,218 | 1989/93/95 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Birmingham | AL | 307 | 1,415 | 1,922 | 385 | 3,259 | 3,644 | 1,430 | 1990 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Birmingham | AL | 730 | 1,725 | 2,981 | 730 | 4,706 | 5,436 | 1,544 | 1990 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Montgomery | AL | 863 | 2,041 | 1,415 | 863 | 3,456 | 4,319 | 1,630 | 1982 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jacksonville | FL | 326 | 1,515 | 1,368 | 326 | 2,883 | 3,209 | 1,182 | 1987 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pensacola | FL | 369 | 1,358 | 3,194 | 369 | 4,552 | 4,921 | 1,901 | 1986 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pensacola | FL | 244 | 1,128 | 2,819 | 720 | 3,471 | 4,191 | 1,205 | 1990 | 6/26/1995 | 5 to 40 years |
Initial Cost to Company | Cost Capitalized Subsequent to Acquisition | Gross Amount at Which Carried at Close of Period | Life on which depreciation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Cost Capitalized Subsequent to Acquisition | Gross Amount at Which Carried at Close of Period | Encum | Building, Equipment and | Building, Equipment and | Building, Equipment and | Accum. | Date of | Date | in latest income statement | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Description | ST | Encum brance | Land | Building, Equipment and Impvmts | Building, Equipment and Impvmts | Land | Building, Equipment and Impvmts | Total | Accum. Deprec. | Date of Const. | Date Acquired | Life on which depr in latest income statement is computed | ST | brance | Land | Impvmts. | Impvmts. | Land | Impvmts. | Total | Deprec. | Const. | Acquired | is completed | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Alexandria | VA | 1,375 | 3,220 | 2,617 | 1,376 | 5,836 | 7,212 | 2,561 | 1984 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pensacola | FL | 244 | 901 | 620 | 244 | 1,521 | 1,765 | 776 | 1986 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Melbourne | FL | 834 | 2,066 | 1,311 | 1,591 | 2,620 | 4,211 | 1,325 | 1986 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hartford | CT | 234 | 861 | 3,055 | 612 | 3,538 | 4,150 | 1,011 | 1992 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Atlanta | GA | 256 | 1,244 | 2,097 | 256 | 3,341 | 3,597 | 1,307 | 1988 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Norfolk | VA | 313 | 1,462 | 2,618 | 313 | 4,080 | 4,393 | 1,251 | 1984 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Norfolk II | VA | 278 | 1,004 | 453 | 278 | 1,457 | 1,735 | 746 | 1989 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Birmingham | AL | 307 | 1,415 | 1,866 | 385 | 3,203 | 3,588 | 1,234 | 1990 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Birmingham | AL | 730 | 1,725 | 2,945 | 730 | 4,670 | 5,400 | 1,291 | 1990 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Montgomery | AL | 863 | 2,041 | 864 | 863 | 2,905 | 3,768 | 1,441 | 1982 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jacksonville | FL | 326 | 1,515 | 627 | 326 | 2,142 | 2,468 | 1,054 | 1987 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pensacola | FL | 369 | 1,358 | 3,040 | 369 | 4,398 | 4,767 | 1,625 | 1986 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pensacola | FL | 244 | 1,128 | 2,776 | 720 | 3,428 | 4,148 | 1,008 | 1990 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pensacola | FL | 226 | 1,046 | 686 | 226 | 1,732 | 1,958 | 869 | 1990 | 6/26/1995 | 5 to 40 years | FL | 226 | 1,046 | 784 | 226 | 1,830 | 2,056 | 996 | 1990 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tampa | FL | 1,088 | 2,597 | 1,114 | 1,088 | 3,711 | 4,799 | 1,909 | 1989 | 6/26/1995 | 5 to 40 years | FL | 1,088 | 2,597 | 1,160 | 1,088 | 3,757 | 4,845 | 2,121 | 1989 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Clearwater | FL | 526 | 1,958 | 1,255 | 526 | 3,213 | 3,739 | 1,455 | 1985 | 6/26/1995 | 5 to 40 years | FL | 526 | 1,958 | 1,545 | 526 | 3,503 | 4,029 | 1,660 | 1985 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Clearwater-Largo | FL | 672 | 2,439 | 879 | 672 | 3,318 | 3,990 | 1,576 | 1988 | 6/26/1995 | 5 to 40 years | FL | 672 | 2,439 | 900 | 672 | 3,339 | 4,011 | 1,757 | 1988 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jackson | MS | 343 | 1,580 | 2,491 | 796 | 3,618 | 4,414 | 1,279 | 1990 | 6/26/1995 | 5 to 40 years | MS | 343 | 1,580 | 2,612 | 796 | 3,739 | 4,535 | 1,475 | 1990 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jackson | MS | 209 | 964 | 783 | 209 | 1,747 | 1,956 | 877 | 1990 | 6/26/1995 | 5 to 40 years | MS | 209 | 964 | 870 | 209 | 1,834 | 2,043 | 978 | 1990 | 6/26/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Providence | RI | 345 | 1,268 | 2,081 | 486 | 3,208 | 3,694 | 1,185 | 1984 | 6/26/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Richmond | VA | 443 | 1,602 | 1,053 | 443 | 2,655 | 3,098 | 1,219 | 1987 | 8/25/1995 | 5 to 40 years | VA | 443 | 1,602 | 1,104 | 443 | 2,706 | 3,149 | 1,383 | 1987 | 8/25/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Orlando | FL | 1,161 | 2,755 | 1,262 | 1,162 | 4,016 | 5,178 | 1,949 | 1986 | 9/29/1995 | 5 to 40 years | FL | 1,161 | 2,755 | 2,155 | 1,162 | 4,909 | 6,071 | 2,173 | 1986 | 9/29/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Birmingham | AL | 424 | 1,506 | 1,170 | 424 | 2,676 | 3,100 | 1,259 | 1970 | 1/16/1996 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Harrisburg | PA | 360 | 1,641 | 694 | 360 | 2,335 | 2,695 | 1,167 | 1983 | 12/29/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Harrisburg | PA | 627 | 2,224 | 3,837 | 692 | 5,996 | 6,688 | 1,750 | 1985 | 12/29/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Syracuse | NY | 470 | 1,712 | 1,428 | 472 | 3,138 | 3,610 | 1,349 | 1987 | 12/27/1995 | 5 to 40 years | NY | 470 | 1,712 | 1,512 | 472 | 3,222 | 3,694 | 1,534 | 1987 | 12/27/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ft. Myers | FL | 205 | 912 | 374 | 206 | 1,285 | 1,491 | 744 | 1988 | 12/28/1995 | 5 to 40 years | FL | 205 | 912 | 553 | 206 | 1,464 | 1,670 | 813 | 1988 | 12/28/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ft. Myers | FL | 412 | 1,703 | 695 | 413 | 2,397 | 2,810 | 1,295 | 1991/94 | 12/28/1995 | 5 to 40 years | FL | 412 | 1,703 | 763 | 413 | 2,465 | 2,878 | 1,420 | 1991/94 | 12/28/1995 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Harrisburg | PA | 360 | 1,641 | 711 | 360 | 2,352 | 2,712 | 1,308 | 1983 | 12/29/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Harrisburg | PA | 627 | 2,224 | 3,872 | 692 | 6,031 | 6,723 | 2,068 | 1985 | 12/29/1995 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Newport News | VA | 442 | 1,592 | 1,393 | 442 | 2,985 | 3,427 | 1,203 | 1988/93 | 1/5/1996 | 5 to 40 years | VA | 442 | 1,592 | 1,422 | 442 | 3,014 | 3,456 | 1,408 | 1988/93 | 1/5/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Montgomery | AL | 353 | 1,299 | 859 | 353 | 2,158 | 2,511 | 915 | 1984 | 1/23/1996 | 5 to 40 years | AL | 353 | 1,299 | 1,094 | 353 | 2,393 | 2,746 | 1,042 | 1984 | 1/23/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charleston | SC | 237 | 858 | 847 | 232 | 1,710 | 1,942 | 776 | 1985 | 3/1/1996 | 5 to 40 years | SC | 237 | 858 | 983 | 245 | 1,833 | 2,078 | 893 | 1985 | 3/1/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tampa | FL | 766 | 1,800 | 725 | 766 | 2,525 | 3,291 | 1,189 | 1985 | 3/28/1996 | 5 to 40 years | FL | 766 | 1,800 | 772 | 766 | 2,572 | 3,338 | 1,324 | 1985 | 3/28/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dallas-Ft.Worth | TX | 442 | 1,767 | 399 | 442 | 2,166 | 2,608 | 1,032 | 1987 | 3/29/1996 | 5 to 40 years | TX | 442 | 1,767 | 454 | 442 | 2,221 | 2,663 | 1,146 | 1987 | 3/29/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dallas-Ft.Worth | TX | 408 | 1,662 | 1,215 | 408 | 2,877 | 3,285 | 1,268 | 1986 | 3/29/1996 | 5 to 40 years | TX | 408 | 1,662 | 1,284 | 408 | 2,946 | 3,354 | 1,416 | 1986 | 3/29/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dallas-Ft.Worth | TX | 328 | 1,324 | 449 | 328 | 1,773 | 2,101 | 830 | 1986 | 3/29/1996 | 5 to 40 years | TX | 328 | 1,324 | 431 | 328 | 1,755 | 2,083 | 922 | 1986 | 3/29/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
San Antonio | TX | 436 | 1,759 | 1,345 | 436 | 3,104 | 3,540 | 1,337 | 1986 | 3/29/1996 | 5 to 40 years | TX | 436 | 1,759 | 1,518 | 436 | 3,277 | 3,713 | 1,499 | 1986 | 3/29/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
San Antonio | TX | 289 | 1,161 | 2,381 | 289 | 3,542 | 3,831 | 180 | 2012 | 3/29/1996 | 5 to 40 years | TX | 289 | 1,161 | 2,453 | 289 | 3,614 | 3,903 | 362 | 2012 | 3/29/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Syracuse | NY | 481 | 1,559 | 2,505 | 671 | 3,874 | 4,545 | 1,545 | 1983 | 6/5/1996 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Montgomery | AL | 279 | 1,014 | 1,354 | 433 | 2,214 | 2,647 | 850 | 1988 | 5/21/1996 | 5 to 40 years | AL | 279 | 1,014 | 1,476 | 433 | 2,336 | 2,769 | 1,001 | 1988 | 5/21/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
West Palm | FL | 345 | 1,262 | 502 | 345 | 1,764 | 2,109 | 795 | 1986 | 5/29/1996 | 5 to 40 years | FL | 345 | 1,262 | 667 | 345 | 1,929 | 2,274 | 891 | 1986 | 5/29/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ft. Myers | FL | 229 | 884 | 2,822 | 383 | 3,552 | 3,935 | 653 | 1986 | 5/29/1996 | 5 to 40 years | FL | 229 | 884 | 2,864 | 383 | 3,594 | 3,977 | 875 | 1986 | 5/29/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Syracuse | NY | 481 | 1,559 | 2,643 | 671 | 4,012 | 4,683 | 1,771 | 1983 | 6/5/1996 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lakeland | FL | 359 | 1,287 | 1,257 | 359 | 2,544 | 2,903 | 1,175 | 1988 | 6/26/1996 | 5 to 40 years | FL | 359 | 1,287 | 1,291 | 359 | 2,578 | 2,937 | 1,318 | 1988 | 6/26/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Boston - Springfield | MA | 251 | 917 | 2,376 | 297 | 3,247 | 3,544 | 1,371 | 1986 | 6/28/1996 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Boston—Springfield | MA | 251 | 917 | 2,530 | 297 | 3,401 | 3,698 | 1,567 | 1986 | 6/28/1996 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ft. Myers | FL | 344 | 1,254 | 574 | 310 | 1,862 | 2,172 | 855 | 1987 | 6/28/1996 | 5 to 40 years | FL | 344 | 1,254 | 654 | 310 | 1,942 | 2,252 | 996 | 1987 | 6/28/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cincinnati | OH | 557 | 1,988 | 936 | 689 | 2,792 | 3,481 | 709 | 1988 | 7/23/1996 | 5 to 40 years | OH | 557 | 1,988 | 977 | 688 | 2,834 | 3,522 | 894 | 1988 | 7/23/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Baltimore | MD | 777 | 2,770 | 587 | 777 | 3,357 | 4,134 | 1,545 | 1990 | 7/26/1996 | 5 to 40 years | MD | 777 | 2,770 | 798 | 777 | 3,568 | 4,345 | 1,758 | 1990 | 7/26/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jacksonville | FL | 568 | 2,028 | 1,212 | 568 | 3,240 | 3,808 | 1,518 | 1987 | 8/23/1996 | 5 to 40 years | FL | 568 | 2,028 | 1,366 | 568 | 3,394 | 3,962 | 1,713 | 1987 | 8/23/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jacksonville | FL | 436 | 1,635 | 788 | 436 | 2,423 | 2,859 | 1,119 | 1985 | 8/26/1996 | 5 to 40 years | FL | 436 | 1,635 | 920 | 436 | 2,555 | 2,991 | 1,255 | 1985 | 8/26/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jacksonville | FL | 535 | 2,033 | 530 | 538 | 2,560 | 3,098 | 1,274 | 1987/92 | 8/30/1996 | 5 to 40 years | FL | 535 | 2,033 | 603 | 538 | 2,633 | 3,171 | 1,422 | 1987/92 | 8/30/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charlotte | NC | 487 | 1,754 | 652 | 487 | 2,406 | 2,893 | 1,036 | 1995 | 9/16/1996 | 5 to 40 years | NC | 487 | 1,754 | 683 | 487 | 2,437 | 2,924 | 1,198 | 1995 | 9/16/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charlotte | NC | 315 | 1,131 | 481 | 315 | 1,612 | 1,927 | 731 | 1995 | 9/16/1996 | 5 to 40 years | NC | 315 | 1,131 | 508 | 315 | 1,639 | 1,954 | 845 | 1995 | 9/16/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Orlando | FL | 314 | 1,113 | 1,258 | 314 | 2,371 | 2,685 | 1,025 | 1975 | 10/30/1996 | 5 to 40 years | FL | 314 | 1,113 | 1,296 | 314 | 2,409 | 2,723 | 1,155 | 1975 | 10/30/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rochester | NY | 704 | 2,496 | 2,458 | 707 | 4,951 | 5,658 | 1,722 | 1990 | 12/20/1996 | 5 to 40 years | NY | 704 | 2,496 | 2,851 | 707 | 5,344 | 6,051 | 1,987 | 1990 | 12/20/1996 | 5 to 40 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Youngstown | OH | 600 | 2,142 | 2,574 | 693 | 4,623 | 5,316 | 1,745 | 1988 | 1/10/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cleveland | OH | 751 | 2,676 | 4,405 | 751 | 7,081 | 7,832 | 2,404 | 1986 | 1/10/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cleveland | OH | 725 | 2,586 | 2,332 | 725 | 4,918 | 5,643 | 2,152 | 1978 | 1/10/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cleveland | OH | 637 | 2,918 | 2,052 | 701 | 4,906 | 5,607 | 2,610 | 1979 | 1/10/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cleveland | OH | 495 | 1,781 | 1,386 | 495 | 3,167 | 3,662 | 1,480 | 1979 | 1/10/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cleveland | OH | 761 | 2,714 | 1,734 | 761 | 4,448 | 5,209 | 2,201 | 1977 | 1/10/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cleveland | OH | 418 | 1,921 | 2,934 | 418 | 4,855 | 5,273 | 1,959 | 1970 | 1/10/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cleveland | OH | 606 | 2,164 | 1,523 | 606 | 3,687 | 4,293 | 1,614 | 1982 | 1/10/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
San Antonio | TX | 474 | 1,686 | 688 | 504 | 2,344 | 2,848 | 1,049 | 1981 | 1/30/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
San Antonio | TX | 346 | 1,236 | 576 | 346 | 1,812 | 2,158 | 865 | 1985 | 1/30/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
San Antonio | TX | 432 | 1,560 | 2,101 | 432 | 3,661 | 4,093 | 1,632 | 1995 | 1/30/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Houston-Beaumont | TX | 634 | 2,565 | 4,380 | 634 | 6,945 | 7,579 | 1,940 | 1993/95 | 3/26/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Houston-Beaumont | TX | 566 | 2,279 | 570 | 566 | 2,849 | 3,415 | 1,400 | 1995 | 3/26/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Houston-Beaumont | TX | 293 | 1,357 | 707 | 293 | 2,064 | 2,357 | 947 | 1995 | 3/26/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chesapeake | VA | 260 | 1,043 | 4,720 | 260 | 5,763 | 6,023 | 1,491 | 1988/95 | 3/31/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Orlando-W 25th St | FL | 289 | 1,160 | 2,467 | 616 | 3,300 | 3,916 | 948 | 1984 | 3/31/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Delray | FL | 491 | 1,756 | 778 | 491 | 2,534 | 3,025 | 1,321 | 1969 | 4/11/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Savannah | GA | 296 | 1,196 | 590 | 296 | 1,786 | 2,082 | 875 | 1988 | 5/8/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Delray | FL | 921 | 3,282 | 795 | 921 | 4,077 | 4,998 | 2,021 | 1980 | 5/21/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cleveland-Avon | OH | 301 | 1,214 | 2,302 | 304 | 3,513 | 3,817 | 1,438 | 1989 | 6/4/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dallas-Fort Worth | TX | 965 | 3,864 | 1,728 | 943 | 5,614 | 6,557 | 2,652 | 1977 | 6/30/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Atlanta-Alpharetta | GA | 1,033 | 3,753 | 720 | 1,033 | 4,473 | 5,506 | 2,186 | 1994 | 7/24/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Atlanta-Marietta | GA | 769 | 2,788 | 642 | 825 | 3,374 | 4,199 | 1,641 | 1996 | 7/24/1997 | 5 to 40 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Atlanta-Doraville | GA | 735 | 3,429 | 496 | 735 | 3,925 | 4,660 | 1,962 | 1995 | 8/21/1997 | 5 to 40 years |
Description Youngstown Cleveland Cleveland Cleveland Cleveland Cleveland Cleveland Cleveland San Antonio San Antonio San Antonio Houston-Beaumont Houston-Beaumont Houston-Beaumont Lynchburg-Lakeside Lynchburg-Timberlake Lynchburg-Amherst Chesapeake Orlando-W 25th St Delray Savannah Delray Cleveland-Avon Dallas-Fort Worth Dallas-Fort Worth Atlanta-Alpharetta Atlanta-Marietta Atlanta-Doraville Greensboro-Hilltop Greensboro-StgCch Baton Rouge-Airline Baton Rouge-Airline2 Harrisburg-Peiffers Chesapeake-Military Chesapeake-Volvo Virginia Beach-Shell Virginia Beach-Central Norfolk-Naval Base Tampa-E.Hillsborough Boston-Northbridge Middletown-Harriman Greensboro-High Point Lynchburg-Timberlake Titusville Boston-Salem Providence Chattanooga-Lee Hwy Chattanooga-Hwy 58 Ft. Oglethorpe Birmingham-Walt Providence Raleigh-Durham Description Greensboro-Hilltop Greensboro-StgCch Baton Rouge-Airline Baton Rouge-Airline2 Harrisburg-Peiffers Tampa-E. Hillsborough NY Metro-Middletown Chesapeake-Military Chesapeake-Volvo Virginia Beach-Shell Norfolk-Naval Base Boston-Northbridge Greensboro-High Point Titusville Boston-Salem Providence Chattanooga-Lee Hwy Chattanooga-Hwy 58 Ft. Oglethorpe Birmingham-Walt Salem-Policy Raleigh-Durham Raleigh-Durham Youngstown-Warren Youngstown-Warren Jackson Houston-Katy Melbourne Vero Beach Houston-Humble Houston-Webster Dallas-Fort Worth San Marcos Austin-McNeil Austin-FM Hollywood-Sheridan Pompano Beach-Atlantic Pompano Beach-Sample Boca Raton-18th St Hollywood-N.21st Dallas-Fort Worth Dallas-Fort Worth Cincinnati-Batavia Jackson-N.West Houston-Katy Providence Lafayette-Pinhook 1 Lafayette-Pinhook2 Lafayette-Ambassador Lafayette-Evangeline Lafayette-Guilbeau Phoenix-Gilbert Phoenix-Glendale Phoenix-Mesa Phoenix-Mesa Phoenix-Mesa Phoenix-Mesa Phoenix-Camelback Phoenix-Bell Phoenix-35th Ave Portland Space Coast-Cocoa Dallas-Fort Worth Initial Cost to Company Cost Capitalized
Subsequent to
Acquisition Gross Amount at Which
Carried at Close of Period ST Encum
brance Land Building,
Equipment
and Impvmts Building,
Equipment
and
Impvmts Land Building,
Equipment
and
Impvmts Total Accum.
Deprec. Date of
Const. Date
Acquired Life on
which depr
in latest
income
statement
is computed OH 600 2,142 2,292 693 4,341 5,034 1,520 1988 1/10/1997 5 to 40 years OH 751 2,676 4,123 751 6,799 7,550 1,999 1986 1/10/1997 5 to 40 years OH 725 2,586 2,226 725 4,812 5,537 1,857 1978 1/10/1997 5 to 40 years OH 637 2,918 1,966 701 4,820 5,521 2,307 1979 1/10/1997 5 to 40 years OH 495 1,781 1,132 495 2,913 3,408 1,306 1979 1/10/1997 5 to 40 years OH 761 2,714 1,637 761 4,351 5,112 1,921 1977 1/10/1997 5 to 40 years OH 418 1,921 2,893 418 4,814 5,232 1,689 1970 1/10/1997 5 to 40 years OH 606 2,164 1,477 606 3,641 4,247 1,407 1982 1/10/1997 5 to 40 years TX 474 1,686 531 504 2,187 2,691 938 1981 1/30/1997 5 to 40 years TX 346 1,236 546 346 1,782 2,128 772 1985 1/30/1997 5 to 40 years TX 432 1,560 1,969 432 3,529 3,961 1,418 1995 1/30/1997 5 to 40 years TX 634 2,565 1,449 634 4,014 4,648 1,690 1993/95 3/26/1997 5 to 40 years TX 566 2,279 511 566 2,790 3,356 1,218 1995 3/26/1997 5 to 40 years TX 293 1,357 638 293 1,995 2,288 834 1995 3/26/1997 5 to 40 years VA 335 1,342 1,527 335 2,869 3,204 1,145 1982 3/31/1997 5 to 40 years VA 328 1,315 1,111 328 2,426 2,754 1,070 1985 3/31/1997 5 to 40 years VA 155 710 464 152 1,177 1,329 555 1987 3/31/1997 5 to 40 years VA 260 1,043 3,482 260 4,525 4,785 1,222 1988/95 3/31/1997 5 to 40 years FL 289 1,160 2,106 616 2,939 3,555 773 1984 3/31/1997 5 to 40 years FL 491 1,756 730 491 2,486 2,977 1,184 1969 4/11/1997 5 to 40 years GA 296 1,196 578 296 1,774 2,070 768 1988 5/8/1997 5 to 40 years FL 921 3,282 655 921 3,937 4,858 1,808 1980 5/21/1997 5 to 40 years OH 301 1,214 2,275 304 3,486 3,790 1,238 1989 6/4/1997 5 to 40 years TX 965 3,864 1,553 943 5,439 6,382 2,370 1977 6/30/1997 5 to 40 years TX 370 1,486 743 370 2,229 2,599 1,048 1975 6/30/1997 5 to 40 years GA 1,033 3,753 690 1,033 4,443 5,476 1,974 1994 7/24/1997 5 to 40 years GA 769 2,788 577 825 3,309 4,134 1,465 1996 7/24/1997 5 to 40 years GA 735 3,429 456 735 3,885 4,620 1,765 1995 8/21/1997 5 to 40 years NC 268 1,097 431 231 1,565 1,796 699 1995 9/25/1997 5 to 40 years NC 89 376 1,729 89 �� 2,105 2,194 788 1997 9/25/1997 5 to 40 years LA 396 1,831 1,115 421 2,921 3,342 1,202 1982 10/9/1997 5 to 40 years LA 282 1,303 435 282 1,738 2,020 794 1985 11/21/1997 5 to 40 years PA 635 2,550 669 637 3,217 3,854 1,430 1984 12/3/1997 5 to 40 years VA 542 2,210 486 542 2,696 3,238 1,144 1996 2/5/1998 5 to 40 years VA 620 2,532 1,233 620 3,765 4,385 1,503 1995 2/5/1998 5 to 40 years VA 540 2,211 431 540 2,642 3,182 1,154 1991 2/5/1998 5 to 40 years VA 864 3,994 1,074 864 5,068 5,932 2,131 1993/95 2/5/1998 5 to 40 years VA 1,243 5,019 947 1,243 5,966 7,209 2,534 1975 2/5/1998 5 to 40 years FL 709 3,235 897 709 4,132 4,841 1,863 1985 2/4/1998 5 to 40 years MA 441 1,788 1,092 694 2,627 3,321 643 1988 2/9/1998 5 to 40 years NY 843 3,394 784 843 4,178 5,021 1,811 1989/95 2/4/1998 5 to 40 years NC 397 1,834 658 397 2,492 2,889 1,087 1993 2/10/1998 5 to 40 years VA 488 1,746 716 488 2,462 2,950 1,016 1990/96 2/18/1998 5 to 40 years FL 492 1,990 1,163 688 2,957 3,645 756 1986/90 2/25/1998 5 to 40 years MA 733 2,941 1,372 733 4,313 5,046 1,923 1979 3/3/1998 5 to 40 years RI 345 1,268 2,032 486 3,159 3,645 1,001 1984 6/26/1995 5 to 40 years TN 384 1,371 617 384 1,988 2,372 903 1987 3/27/1998 5 to 40 years TN 296 1,198 2,225 414 3,305 3,719 1,098 1985 3/27/1998 5 to 40 years GA 349 1,250 1,737 464 2,872 3,336 888 1989 3/27/1998 5 to 40 years AL 544 1,942 1,301 544 3,243 3,787 1,366 1984 3/27/1998 5 to 40 years RI 702 2,821 3,846 702 6,667 7,369 1,920 1984/88 3/26/1998 5 to 40 years NC 775 3,103 911 775 4,014 4,789 1,677 1988/91 4/9/1998 5 to 40 years Initial Cost to Company Cost
Capitalized
Subsequent
to
Acquisition Gross Amount at Which
Carried at Close of Period Life on
which
depreciation Encum Building,
Equipment
and Building,
Equipment
and Building,
Equipment
and Accum. Date of Date in latest
income
statement ST brance Land Impvmts. Impvmts. Land Impvmts. Total Deprec. Const. Acquired is completed NC 268 1,097 859 231 1,993 2,224 814 1995 9/25/1997 5 to 40 years NC 89 376 1,854 89 2,230 2,319 941 1997 9/25/1997 5 to 40 years LA 396 1,831 1,161 421 2,967 3,388 1,382 1982 10/9/1997 5 to 40 years LA 282 1,303 504 282 1,807 2,089 894 1985 11/21/1997 5 to 40 years PA 635 2,550 731 637 3,279 3,916 1,626 1984 12/3/1997 5 to 40 years FL 709 3,235 979 709 4,214 4,923 2,041 1985 2/4/1998 5 to 40 years NY 843 3,394 1,038 843 4,432 5,275 2,047 1989/95 2/4/1998 5 to 40 years VA 542 2,210 527 542 2,737 3,279 1,304 1996 2/5/1998 5 to 40 years VA 620 2,532 1,289 620 3,821 4,441 1,727 1995 2/5/1998 5 to 40 years VA 540 2,211 508 540 2,719 3,259 1,300 1991 2/5/1998 5 to 40 years VA 1,243 5,019 990 1,243 6,009 7,252 2,862 1975 2/5/1998 5 to 40 years MA 441 1,788 1,120 694 2,655 3,349 813 1988 2/9/1998 5 to 40 years NC 397 1,834 964 397 2,798 3,195 1,241 1993 2/10/1998 5 to 40 years FL 492 1,990 1,282 688 3,076 3,764 953 1986/90 2/25/1998 5 to 40 years MA 733 2,941 1,676 733 4,617 5,350 2,186 1979 3/3/1998 5 to 40 years RI 702 2,821 4,243 702 7,064 7,766 2,310 1984/88 3/26/1998 5 to 40 years TN 384 1,371 623 384 1,994 2,378 1,018 1987 3/27/1998 5 to 40 years TN 296 1,198 2,358 414 3,438 3,852 1,293 1985 3/27/1998 5 to 40 years GA 349 1,250 1,834 464 2,969 3,433 1,061 1989 3/27/1998 5 to 40 years AL 544 1,942 1,311 544 3,253 3,797 1,555 1984 3/27/1998 5 to 40 years NH 742 2,977 649 742 3,626 4,368 1,679 1980 4/7/1998 5 to 40 years NC 775 3,103 940 775 4,043 4,818 1,904 1988/91 4/9/1998 5 to 40 years NC 940 3,763 979 940 4,742 5,682 2,235 1990/96 4/9/1998 5 to 40 years OH 522 1,864 1,393 569 3,210 3,779 1,454 1986 4/22/1998 5 to 40 years OH 512 1,829 2,765 633 4,473 5,106 1,561 1986 4/22/1998 5 to 40 years MS 744 3,021 288 744 3,309 4,053 1,575 1995 5/13/1998 5 to 40 years TX 419 1,524 4,064 419 5,588 6,007 1,613 1994 5/20/1998 5 to 40 years FL 662 2,654 3,704 662 6,358 7,020 1,558 1985 6/2/1998 5 to 40 years FL 489 1,813 1,768 584 3,486 4,070 1,136 1997 6/12/1998 5 to 40 years TX 447 �� 1,790 2,587 740 4,084 4,824 1,523 1986 6/16/1998 5 to 40 years TX 635 2,302 371 635 2,673 3,308 1,200 1997 6/19/1998 5 to 40 years TX 548 1,988 423 548 2,411 2,959 1,097 1997 6/19/1998 5 to 40 years TX 324 1,493 2,204 324 3,697 4,021 1,345 1994 6/30/1998 5 to 40 years TX 492 1,995 2,631 510 4,608 5,118 1,509 1994 6/30/1998 5 to 40 years TX 484 1,951 724 481 2,678 3,159 1,184 1996 6/30/1998 5 to 40 years FL 1,208 4,854 700 1,208 5,554 6,762 2,620 1988 7/1/1998 5 to 40 years FL 944 3,803 795 944 4,598 5,542 2,182 1985 7/1/1998 5 to 40 years FL 903 3,643 592 903 4,235 5,138 1,978 1988 7/1/1998 5 to 40 years FL 1,503 6,059 -1,853 851 4,858 5,709 2,298 1991 7/1/1998 5 to 40 years FL 840 3,373 642 840 4,015 4,855 1,913 1987 8/3/1998 5 to 40 years TX 550 1,998 850 550 2,848 3,398 1,199 1996 9/29/1998 5 to 40 years TX 670 2,407 1,761 670 4,168 4,838 1,690 1996 10/9/1998 5 to 40 years OH 390 1,570 1,462 390 3,032 3,422 1,136 1988 11/19/1998 5 to 40 years MS 460 1,642 765 460 2,407 2,867 1,151 1984 12/1/1998 5 to 40 years TX 507 2,058 1,812 507 3,870 4,377 1,455 1993 12/15/1998 5 to 40 years RI 447 1,776 1,023 447 2,799 3,246 1,268 1986/94 2/2/1999 5 to 40 years LA 556 1,951 1,288 556 3,239 3,795 1,606 1980 2/17/1999 5 to 40 years LA 708 2,860 1,320 708 4,180 4,888 1,591 1992/94 2/17/1999 5 to 40 years LA 314 1,095 954 314 2,049 2,363 1,055 1975 2/17/1999 5 to 40 years LA 188 652 1,674 188 2,326 2,514 1,073 1977 2/17/1999 5 to 40 years LA 963 3,896 1,136 963 5,032 5,995 2,108 1994 2/17/1999 5 to 40 years AZ 651 2,600 1,313 772 3,792 4,564 1,600 1995 5/18/1999 5 to 40 years AZ 565 2,596 769 565 3,365 3,930 1,472 1997 5/18/1999 5 to 40 years AZ 330 1,309 2,586 733 3,492 4,225 1,173 1986 5/18/1999 5 to 40 years AZ 339 1,346 740 339 2,086 2,425 882 1986 5/18/1999 5 to 40 years AZ 291 1,026 1,143 291 2,169 2,460 835 1976 5/18/1999 5 to 40 years AZ 354 1,405 594 354 1,999 2,353 911 1986 5/18/1999 5 to 40 years AZ 453 1,610 1,095 453 2,705 3,158 1,211 1984 5/18/1999 5 to 40 years AZ 872 3,476 3,618 872 7,094 7,966 2,354 1984 5/18/1999 5 to 40 years AZ 849 3,401 955 849 4,356 5,205 1,932 1996 5/21/1999 5 to 40 years ME 410 1,626 2,024 410 3,650 4,060 1,435 1988 8/2/1999 5 to 40 years FL 667 2,373 1,014 667 3,387 4,054 1,514 1982 9/29/1999 5 to 40 years TX 335 1,521 853 335 2,374 2,709 921 1985 11/9/1999 5 to 40 years
Description Raleigh-Durham Salem-Policy Youngstown-Warren Youngstown-Warren Melbourne Jackson Houston-Katy Hollywood-Sheridan Pompano Beach-Atlantic Pompano Beach-Sample Boca Raton-18th St Vero Beach Houston-Humble Houston-Webster Dallas-Fort Worth Hollywood-N.21st San Marcos Austin-McNeil Austin-FM Dallas-Fort Worth Dallas-Fort Worth Cincinnati-Batavia Jackson-N.West Houston-Katy Providence Lafayette-Pinhook 1 Lafayette-Pinhook2 Lafayette-Ambassador Lafayette-Evangeline Lafayette-Guilbeau Phoenix-Gilbert Phoenix-Glendale Phoenix-Mesa Phoenix-Mesa Phoenix-Mesa Phoenix-Mesa Phoenix-Camelback Phoenix-Bell Phoenix-35th Ave Portland Cocoa Dallas-Fort Worth Middletown-Monroe Boston - N. Andover Houston-Seabrook Ft. Lauderdale Birmingham-Bessemer Brewster Austin-Lamar Houston Ft.Myers Boston-Dracut Description NY Metro-Middletown Boston-N. Andover Houston-Seabrook Ft. Lauderdale Birmingham-Bessemer NY Metro-Brewster Austin-Lamar Houston Ft.Myers Boston-Dracut Boston-Methuen Columbia Myrtle Beach Maine-Saco Boston-Plymouth Boston-Sandwich Syracuse Dallas-Fort Worth Dallas-Fort Worth San Antonio-Hunt Houston-Humble Houston-Pasadena Houston-League City Houston-Montgomery Houston-S. Hwy 6 Houston-Beaumont The Hamptons The Hamptons The Hamptons The Hamptons Dallas-Fort Worth Dallas-Fort Worth Stamford Houston-Tomball Houston-Conroe Houston-Spring Houston-Bissonnet Houston-Alvin Clearwater Houston-Missouri City Chattanooga-Hixson Austin-Round Rock Long Island-Bayshore Syracuse - Cicero Boston-Springfield Stamford Montgomery-Richard Houston-Jones Boston-Oxford Austin-290E San Antonio-Marbach Austin-South 1st Houston-Pinehurst Atlanta-Marietta Baton Rouge SanMarcos-Hwy 35S Houston-Baytown Houston-Cypress Rochester Houston-Jones Rd 2 Lafayette Lafayette Lafayette Initial Cost to Company Cost Capitalized
Subsequent to
Acquisition Gross Amount at Which
Carried at Close of Period ST Encum
brance Land Building,
Equipment
and Impvmts Building,
Equipment
and
Impvmts Land Building,
Equipment
and
Impvmts Total Accum.
Deprec. Date of
Const. Date
Acquired Life on
which depr
in latest
income
statement
is computed NC 940 3,763 837 940 4,600 5,540 1,965 1990/96 4/9/1998 5 to 40 years NH 742 2,977 532 742 3,509 4,251 1,474 1980 4/7/1998 5 to 40 years OH 522 1,864 1,382 569 3,199 3,768 1,280 1986 4/22/1998 5 to 40 years OH 512 1,829 2,031 633 3,739 4,372 1,329 1986 4/22/1998 5 to 40 years FL 662 2,654 1,916 662 4,570 5,232 1,230 1985 6/2/1998 5 to 40 years MS 744 3,021 251 744 3,272 4,016 1,384 1995 5/13/1998 5 to 40 years TX 419 1,524 3,974 419 5,498 5,917 1,347 1994 5/20/1998 5 to 40 years FL 1,208 4,854 630 1,208 5,484 6,692 2,324 1988 7/1/1998 5 to 40 years FL 944 3,803 573 944 4,376 5,320 1,941 1985 7/1/1998 5 to 40 years FL 903 3,643 456 903 4,099 5,002 1,756 1988 7/1/1998 5 to 40 years FL 1,503 6,059 -1,966 851 4,745 5,596 2,027 1991 7/1/1998 5 to 40 years FL 489 1,813 1,710 584 3,428 4,012 945 1997 6/12/1998 5 to 40 years TX 447 1,790 2,454 740 3,951 4,691 1,332 1986 6/16/1998 5 to 40 years TX 635 2,302 235 635 2,537 3,172 1,059 1997 6/19/1998 5 to 40 years TX 548 1,988 394 548 2,382 2,930 984 1997 6/19/1998 5 to 40 years FL 840 3,373 598 840 3,971 4,811 1,711 1987 8/3/1998 5 to 40 years TX 324 1,493 2,135 324 3,628 3,952 1,179 1994 6/30/1998 5 to 40 years TX 492 1,995 2,517 510 4,494 5,004 1,284 1994 6/30/1998 5 to 40 years TX 484 1,951 613 481 2,567 3,048 1,051 1996 6/30/1998 5 to 40 years TX 550 1,998 878 550 2,876 3,426 1,083 1996 9/29/1998 5 to 40 years TX 670 2,407 1,708 670 4,115 4,785 1,462 1996 10/9/1998 5 to 40 years OH 390 1,570 1,167 390 2,737 3,127 976 1988 11/19/1998 5 to 40 years MS 460 1,642 596 460 2,238 2,698 1,023 1984 12/1/1998 5 to 40 years TX 507 2,058 1,747 507 3,805 4,312 1,262 1993 12/15/1998 5 to 40 years RI 447 1,776 946 447 2,722 3,169 1,114 1986/94 2/2/1999 5 to 40 years LA 556 1,951 1,184 556 3,135 3,691 1,423 1980 2/17/1999 5 to 40 years LA 708 2,860 1,198 708 4,058 4,766 1,338 1992/94 2/17/1999 5 to 40 years LA 314 1,095 927 314 2,022 2,336 911 1975 2/17/1999 5 to 40 years LA 188 652 1,625 188 2,277 2,465 943 1977 2/17/1999 5 to 40 years LA 963 3,896 982 963 4,878 5,841 1,847 1994 2/17/1999 5 to 40 years AZ 651 2,600 1,254 772 3,733 4,505 1,388 1995 5/18/1999 5 to 40 years AZ 565 2,596 682 565 3,278 3,843 1,289 1997 5/18/1999 5 to 40 years AZ 330 1,309 2,557 733 3,463 4,196 968 1986 5/18/1999 5 to 40 years AZ 339 1,346 701 339 2,047 2,386 771 1986 5/18/1999 5 to 40 years AZ 291 1,026 1,034 291 2,060 2,351 716 1976 5/18/1999 5 to 40 years AZ 354 1,405 526 354 1,931 2,285 804 1986 5/18/1999 5 to 40 years AZ 453 1,610 953 453 2,563 3,016 1,065 1984 5/18/1999 5 to 40 years AZ 872 3,476 3,518 872 6,994 7,866 1,966 1984 5/18/1999 5 to 40 years AZ 849 3,401 843 849 4,244 5,093 1,676 1996 5/21/1999 5 to 40 years ME 410 1,626 1,929 410 3,555 3,965 1,238 1988 8/2/1999 5 to 40 years FL 667 2,373 877 667 3,250 3,917 1,313 1982 9/29/1999 5 to 40 years TX 335 1,521 592 335 2,113 2,448 826 1985 11/9/1999 5 to 40 years NY 276 1,312 1,277 276 2,589 2,865 872 1998 2/2/2000 5 to 40 years MA 633 2,573 984 633 3,557 4,190 1,267 1989 2/15/2000 5 to 40 years TX 633 2,617 446 633 3,063 3,696 1,201 1996 3/1/2000 5 to 40 years FL 384 1,422 633 384 2,055 2,439 789 1994 5/2/2000 5 to 40 years AL 254 1,059 1,340 254 2,399 2,653 744 1998 11/15/2000 5 to 40 years NY 1,716 6,920 1,543 1,981 8,198 10,179 1,627 1991/97 12/27/2000 5 to 40 years TX 837 2,977 3,527 966 6,375 7,341 928 1996/99 2/22/2001 5 to 40 years TX 733 3,392 756 841 4,040 4,881 1,060 1993/97 3/2/2001 5 to 40 years FL 787 3,249 663 902 3,797 4,699 1,001 1997 3/13/2001 5 to 40 years MA 1,035 3,737 667 1,104 4,335 5,439 1,496 1986 12/1/2001 5 to 40 years Initial Cost to Company Cost
Capitalized
Subsequent
to
Acquisition Gross Amount at Which
Carried at Close of Period Life on
which
depreciation Encum Building,
Equipment
and Building,
Equipment
and Building,
Equipment
and Accum. Date of Date in latest
income
statement ST brance Land Impvmts. Impvmts. Land Impvmts. Total Deprec. Const. Acquired is completed NY 276 1,312 1,314 276 2,626 2,902 1,010 1998 2/2/2000 5 to 40 years MA 633 2,573 1,055 633 3,628 4,261 1,458 1989 2/15/2000 5 to 40 years TX 633 2,617 476 633 3,093 3,726 1,351 1996 3/1/2000 5 to 40 years FL 384 1,422 842 384 2,264 2,648 897 1994 5/2/2000 5 to 40 years AL 254 1,059 2,066 332 3,047 3,379 906 1998 11/15/2000 5 to 40 years NY 1,716 6,920 1,754 1,981 8,409 10,390 2,108 1991/97 12/27/2000 5 to 40 years TX 837 2,977 3,579 966 6,427 7,393 1,271 1996/99 2/22/2001 5 to 40 years TX 733 3,392 900 841 4,184 5,025 1,300 1993/97 3/2/2001 5 to 40 years FL 787 3,249 750 902 3,884 4,786 1,254 1997 3/13/2001 5 to 40 years MA 1,035 3,737 743 1,104 4,411 5,515 1,743 1986 12/1/2001 5 to 40 years MA 1,024 3,649 827 1,091 4,409 5,500 1,675 1984 12/1/2001 5 to 40 years SC 883 3,139 1,473 942 4,553 5,495 1,624 1985 12/1/2001 5 to 40 years SC 552 1,970 1,155 589 3,088 3,677 1,192 1984 12/1/2001 5 to 40 years ME 534 1,914 511 570 2,389 2,959 908 1988 12/3/2001 5 to 40 years MA 1,004 4,584 2,370 1,004 6,954 7,958 2,292 1996 12/19/2001 5 to 40 years MA 670 3,060 611 714 3,627 4,341 1,363 1984 12/19/2001 5 to 40 years NY 294 1,203 1,194 327 2,364 2,691 774 1987 2/5/2002 5 to 40 years TX 734 2,956 822 784 3,728 4,512 1,379 1984 2/13/2002 5 to 40 years TX 394 1,595 499 421 2,067 2,488 763 1985 2/13/2002 5 to 40 years TX 381 1,545 3,979 618 5,287 5,905 1,185 1980 2/13/2002 5 to 40 years TX 919 3,696 702 919 4,398 5,317 1,562 1998/02 6/19/2002 5 to 40 years TX 612 2,468 463 612 2,931 3,543 1,053 1999 6/19/2002 5 to 40 years TX 689 3,159 795 689 3,954 4,643 1,336 1994/97 6/19/2002 5 to 40 years TX 817 3,286 2,190 1,119 5,174 6,293 1,696 1998 6/19/2002 5 to 40 years TX 407 1,650 327 407 1,977 2,384 723 1997 6/19/2002 5 to 40 years TX 817 3,287 499 817 3,786 4,603 1,418 1996 6/19/2002 5 to 40 years NY 2,207 8,866 830 2,207 9,696 11,903 3,497 1989/95 12/16/2002 5 to 40 years NY 1,131 4,564 608 1,131 5,172 6,303 1,823 1998 12/16/2002 5 to 40 years NY 635 2,918 447 635 3,365 4,000 1,193 1997 12/16/2002 5 to 40 years NY 1,251 5,744 543 1,251 6,287 7,538 2,198 1994/98 12/16/2002 5 to 40 years TX 1,039 4,201 258 1,039 4,459 5,498 1,517 1995/99 8/26/2003 5 to 40 years TX 827 3,776 509 827 4,285 5,112 1,422 1998/01 10/1/2003 5 to 40 years CT 2,713 11,013 595 2,713 11,608 14,321 3,920 1998 3/17/2004 5 to 40 years TX 773 3,170 1,876 773 5,046 5,819 1,590 2000 5/19/2004 5 to 40 years TX 1,195 4,877 435 1,195 5,312 6,507 1,664 2001 5/19/2004 5 to 40 years TX 1,103 4,550 512 1,103 5,062 6,165 1,684 2001 5/19/2004 5 to 40 years TX 1,061 4,427 2,910 1,061 7,337 8,398 2,191 2003 5/19/2004 5 to 40 years TX 388 1,640 1,046 388 2,686 3,074 801 2003 5/19/2004 5 to 40 years FL 1,720 6,986 315 1,720 7,301 9,021 2,366 2001 6/3/2004 5 to 40 years TX 1,167 4,744 3,576 1,566 7,921 9,487 2,176 1998 6/23/2004 5 to 40 years TN 1,365 5,569 1,845 1,365 7,414 8,779 2,388 1998/02 8/4/2004 5 to 40 years TX 2,047 5,857 880 1,976 6,808 8,784 2,181 2000 8/5/2004 5 to 40 years NY 1,131 4,609 252 1,131 4,861 5,992 1,492 2003 3/15/2005 5 to 40 years NY 527 2,121 3,273 527 5,394 5,921 1,014 1988/02 3/16/2005 5 to 40 years MA 612 2,501 368 612 2,869 3,481 859 1965/75 4/12/2005 5 to 40 years CT 1,612 6,585 289 1,612 6,874 8,486 2,166 2002 4/14/2005 5 to 40 years AL 1,906 7,726 389 1,906 8,115 10,021 2,450 1997 6/1/2005 5 to 40 years TX 1,214 4,949 363 1,215 5,311 6,526 1,592 1997/99 6/6/2005 5 to 40 years MA 470 1,902 1,668 470 3,570 4,040 1,008 2002 6/23/2005 5 to 40 years TX 537 2,183 -320 491 1,909 2,400 638 2003 7/12/2005 5 to 40 years TX 556 2,265 549 556 2,814 3,370 866 2003 7/12/2005 5 to 40 years TX 754 3,065 259 754 3,324 4,078 1,028 2003 7/12/2005 5 to 40 years TX 484 1,977 1,544 484 3,521 4,005 957 2002/04 7/12/2005 5 to 40 years GA 811 3,397 580 811 3,977 4,788 1,224 2003 9/15/2005 5 to 40 years LA 719 2,927 2,568 719 5,495 6,214 1,291 1984/94 11/15/2005 5 to 40 years TX 628 2,532 3,288 982 5,466 6,448 773 2001 1/10/2006 5 to 40 years TX 596 2,411 287 596 2,698 3,294 735 2002 1/10/2006 5 to 40 years TX 721 2,994 2,318 721 5,312 6,033 1,303 2003 1/13/2006 5 to 40 years NY 937 3,779 228 937 4,007 4,944 1,151 2002/06 2/1/2006 5 to 40 years TX 707 2,933 2,831 707 5,764 6,471 1,506 2000 3/9/2006 5 to 40 years LA 411 1,621 281 411 1,902 2,313 592 1997 4/13/2006 5 to 40 years LA 463 1,831 208 463 2,039 2,502 616 2001/04 4/13/2006 5 to 40 years LA 601 2,406 1,442 601 3,848 4,449 1,071 2002 4/13/2006 5 to 40 years
Description Boston-Methuen Columbia Myrtle Beach Kingsland Saco Boston-Plymouth Boston-Sandwich Syracuse Dallas-Fort Worth Dallas-Fort Worth San Antonio-Hunt Houston-Humble Houston-Pasadena Houston-League City Houston-Montgomery Houston Houston-Beaumont The Hamptons The Hamptons The Hamptons The Hamptons Dallas-Fort Worth Dallas-Fort Worth Stamford Houston-Tomball Houston-Conroe Houston-Spring Houston-Bissonnet Houston-Alvin Clearwater Houston-Missouri City Chattanooga-Hixson Austin-Round Rock Syracuse - Cicero Long Island-Bayshore Boston-Springfield Stamford Houston-Jones Montgomery-Richard Boston-Oxford Austin-290E SanAntonio-Marbach Austin-South 1st Houston-Pinehurst Atlanta-Marietta Baton Rouge Houston-Cypress San Marcos-Hwy 35S Houston-Baytown Rochester Houston-Jones Rd 2 Lafayette Description Lafayette Manchester Clearwater-Largo Clearwater-Pinellas Park Clearwater-Tarpon Spring New Orleans St Louis-Meramec St Louis-Charles Rock St Louis-Shackelford St Louis-W.Washington St Louis-Howdershell St Louis-Lemay Ferry St Louis-Manchester Dallas-Fort Worth Dallas-Fort Worth Dallas-Fort Worth Dallas-Fort Worth Dallas-Fort Worth Dallas-Fort Worth San Antonio-Blanco San Antonio-Broadway San Antonio-Huebner Nashua Lafayette Chattanooga-Lee Hwy II Montgomery-E.S.Blvd Auburn-Pepperell Pkwy Auburn-Gatewood Dr Columbus-Williams Rd Columbus-Miller Rd Columbus-Armour Rd Columbus-Amber Dr Concord Houston-Beaumont Houston-Beaumont Buffalo-Langner Rd Buffalo-Transit Rd Buffalo-Lake Ave Buffalo-Union Rd Buffalo-NF Blvd Buffalo-Young St Buffalo-Sheridan Dr Buffalo-Transit Rd Rochester-Phillips Rd San Antonio-Foster Huntsville-Memorial Pkwy Huntsville-Madison 1 Biloxi-Gulfport Huntsville-Hwy 72 Mobile-Airport Blvd Biloxi-Gulfport Huntsville-Madison 2 Foley-Hwy 59 Pensacola6-Nine Mile Auburn-College St Biloxi-Gulfport Pensacola7-Hwy 98 Montgomery-Arrowhead Montgomery-McLemore Houston-Beaumont Hattiesburg-Classic Biloxi-Ginger Foley-7905 St Hwy 59 Initial Cost to Company Cost Capitalized
Subsequent to
Acquisition Gross Amount at Which
Carried at Close of Period ST Encum
brance Land Building,
Equipment
and Impvmts Building,
Equipment
and
Impvmts Land Building,
Equipment
and
Impvmts Total Accum.
Deprec. Date of
Const. Date
Acquired Life on
which depr
in latest
income
statement
is computed MA 1,024 3,649 751 1,091 4,333 5,424 1,439 1984 12/1/2001 5 to 40 years SC 883 3,139 1,359 942 4,439 5,381 1,381 1985 12/1/2001 5 to 40 years SC 552 1,970 1,002 588 2,936 3,524 993 1984 12/1/2001 5 to 40 years GA 470 1,902 3,257 666 4,963 5,629 1,271 1989 12/1/2001 5 to 40 years ME 534 1,914 417 570 2,295 2,865 770 1988 12/3/2001 5 to 40 years MA 1,004 4,584 2,340 1,004 6,924 7,928 1,933 1996 12/19/2001 5 to 40 years MA 670 3,060 545 714 3,561 4,275 1,174 1984 12/19/2001 5 to 40 years NY 294 1,203 1,130 327 2,300 2,627 633 1987 2/5/2002 5 to 40 years TX 734 2,956 792 784 3,698 4,482 1,187 1984 2/13/2002 5 to 40 years TX 394 1,595 411 421 1,979 2,400 660 1985 2/13/2002 5 to 40 years TX 381 1,545 3,814 618 5,122 5,740 891 1980 2/13/2002 5 to 40 years TX 919 3,696 641 919 4,337 5,256 1,348 1998/02 6/19/2002 5 to 40 years TX 612 2,468 443 612 2,911 3,523 904 1999 6/19/2002 5 to 40 years TX 689 3,159 601 689 3,760 4,449 1,138 1994/97 6/19/2002 5 to 40 years TX 817 3,286 2,210 1,119 5,194 6,313 1,428 1998 6/19/2002 5 to 40 years TX 407 1,650 270 407 1,920 2,327 622 1997 6/19/2002 5 to 40 years TX 817 3,287 446 817 3,733 4,550 1,188 1996 6/19/2002 5 to 40 years NY 2,207 8,866 756 2,207 9,622 11,829 2,990 1989/95 12/16/2002 5 to 40 years NY 1,131 4,564 584 1,131 5,148 6,279 1,556 1998 12/16/2002 5 to 40 years NY 635 2,918 432 635 3,350 3,985 1,006 1997 12/16/2002 5 to 40 years NY 1,251 5,744 493 1,252 6,236 7,488 1,876 1994/98 12/16/2002 5 to 40 years TX 1,039 4,201 218 1,039 4,419 5,458 1,273 1995/99 8/26/2003 5 to 40 years TX 827 3,776 469 827 4,245 5,072 1,199 1998/01 10/1/2003 5 to 40 years CT 2,713 11,013 393 2,713 11,406 14,119 3,299 1998 3/17/2004 5 to 40 years TX 773 3,170 1,801 773 4,971 5,744 1,319 2000 5/19/2004 5 to 40 years TX 1,195 4,877 288 1,195 5,165 6,360 1,426 2001 5/19/2004 5 to 40 years TX 1,103 4,550 362 1,103 4,912 6,015 1,387 2001 5/19/2004 5 to 40 years TX 1,061 4,427 2,848 1,061 7,275 8,336 1,802 2003 5/19/2004 5 to 40 years TX 388 1,640 991 388 2,631 3,019 656 2003 5/19/2004 5 to 40 years FL 1,720 6,986 197 1,720 7,183 8,903 1,955 2001 6/3/2004 5 to 40 years TX 1,167 4,744 3,537 1,566 7,882 9,448 1,771 1998 6/23/2004 5 to 40 years TN 1,365 5,569 1,603 1,365 7,172 8,537 1,925 1998/02 8/4/2004 5 to 40 years TX 2,047 5,857 826 1,976 6,754 8,730 1,817 2000 8/5/2004 5 to 40 years NY 527 2,121 852 527 2,973 3,500 796 1988/02 3/16/2005 5 to 40 years NY 1,131 4,609 209 1,131 4,818 5,949 1,221 2003 3/15/2005 5 to 40 years MA 612 2,501 220 612 2,721 3,333 714 1965/75 4/12/2005 5 to 40 years CT 1,612 6,585 240 1,612 6,825 8,437 1,791 2002 4/14/2005 5 to 40 years TX 1,214 4,949 270 1,215 5,218 6,433 1,294 1997/99 6/6/2005 5 to 40 years AL 1,906 7,726 284 1,906 8,010 9,916 2,019 1997 6/1/2005 5 to 40 years MA 470 1,902 1,648 470 3,550 4,020 800 2002 6/23/2005 5 to 40 years TX 537 2,183 -281 491 1,948 2,439 545 2003 7/12/2005 5 to 40 years TX 556 2,265 514 556 2,779 3,335 689 2003 7/12/2005 5 to 40 years TX 754 3,065 219 754 3,284 4,038 858 2003 7/12/2005 5 to 40 years TX 484 1,977 1,519 484 3,496 3,980 768 2002/04 7/12/2005 5 to 40 years GA 811 3,397 548 811 3,945 4,756 988 2003 9/15/2005 5 to 40 years LA 719 2,927 2,536 719 5,463 6,182 977 1984/94 11/15/2005 5 to 40 years TX 721 2,994 2,282 721 5,276 5,997 1008 2003 1/13/2006 5 to 40 years TX 628 2,532 595 982 2,773 3,755 631 2001 1/10/2006 5 to 40 years TX 596 2,411 285 596 2,696 3,292 614 2002 1/10/2006 5 to 40 years NY 937 3,779 199 937 3,978 4,915 916 2002/06 2/1/2006 5 to 40 years TX 707 2,933 2,756 707 5,689 6,396 1195 2000 3/9/2006 5 to 40 years LA 411 1,621 250 411 1,871 2,282 469 1997 4/13/2006 5 to 40 years Initial Cost to Company Cost
Capitalized
Subsequent
to
Acquisition Gross Amount at Which
Carried at Close of Period Life on
which
depreciation Encum Building,
Equipment
and Building,
Equipment
and Building,
Equipment
and Accum. Date of Date in latest
income
statement ST brance Land Impvmts. Impvmts. Land Impvmts. Total Deprec. Const. Acquired is completed LA 542 1,319 2,210 542 3,529 4,071 920 1997/99 4/13/2006 5 to 40 years NH 832 3,268 185 832 3,453 4,285 977 2000 4/26/2006 5 to 40 years FL 1,270 5,037 376 1,270 5,413 6,683 1,502 1998 6/22/2006 5 to 40 years FL 929 3,676 339 929 4,015 4,944 1,078 2000 6/22/2006 5 to 40 years FL 696 2,739 240 696 2,979 3,675 836 1999 6/22/2006 5 to 40 years LA 1,220 4,805 316 1,220 5,121 6,341 1,432 2000 6/22/2006 5 to 40 years MO 1,113 4,359 378 1,113 4,737 5,850 1,322 1999 6/22/2006 5 to 40 years MO 766 3,040 1,504 766 4,544 5,310 1,009 1999 6/22/2006 5 to 40 years MO 828 3,290 206 828 3,496 4,324 979 1999 6/22/2006 5 to 40 years MO 734 2,867 2,503 734 5,370 6,104 1,139 1980/01 6/22/2006 5 to 40 years MO 899 3,596 324 899 3,920 4,819 1,078 2000 6/22/2006 5 to 40 years MO 890 3,552 473 890 4,025 4,915 1,091 1999 6/22/2006 5 to 40 years MO 697 2,711 225 697 2,936 3,633 809 2000 6/22/2006 5 to 40 years TX 1,256 4,946 475 1,256 5,421 6,677 1,446 1998/03 6/22/2006 5 to 40 years TX 605 2,434 197 605 2,631 3,236 698 2004 6/22/2006 5 to 40 years TX 607 2,428 219 607 2,647 3,254 716 2004 6/22/2006 5 to 40 years TX 1,073 4,276 98 1,073 4,374 5,447 1,184 2003 6/22/2006 5 to 40 years TX 549 2,180 1,148 549 3,328 3,877 793 1998 6/22/2006 5 to 40 years TX 644 2,542 136 644 2,678 3,322 734 1999 6/22/2006 5 to 40 years TX 963 3,836 222 963 4,058 5,021 1,122 2004 6/22/2006 5 to 40 years TX 773 3,060 2,012 773 5,072 5,845 1,118 2000 6/22/2006 5 to 40 years TX 1,175 4,624 365 1,175 4,989 6,164 1,318 1998 6/22/2006 5 to 40 years NH 617 2,422 587 617 3,009 3,626 835 1989 6/29/2006 5 to 40 years LA 699 2,784 3,809 699 6,593 7,292 1,276 1995/99 8/1/2006 5 to 40 years TN 619 2,471 169 619 2,640 3,259 726 2002 8/7/2006 5 to 40 years AL 1,158 4,639 1,032 1,158 5,671 6,829 1,541 1996/97 9/28/2006 5 to 40 years AL 590 2,361 599 590 2,960 3,550 776 1998 9/28/2006 5 to 40 years AL 694 2,758 344 694 3,102 3,796 809 2002/03 9/28/2006 5 to 40 years GA 736 2,905 330 736 3,235 3,971 871 2002/04/06 9/28/2006 5 to 40 years GA 975 3,854 1,383 975 5,237 6,212 1,113 1995 9/28/2006 5 to 40 years GA 0 3,680 324 0 4,004 4,004 1,056 2004/05 9/28/2006 5 to 40 years GA 439 1,745 321 439 2,066 2,505 575 1998 9/28/2006 5 to 40 years NH 813 3,213 2,041 813 5,254 6,067 1,283 2000 10/31/2006 5 to 40 years TX 929 3,647 233 930 3,879 4,809 1,016 2002/04 3/8/2007 5 to 40 years TX 1,537 6,018 611 1,537 6,629 8,166 1,694 2003/06 3/8/2007 5 to 40 years NY 532 2,119 3,492 532 5,611 6,143 908 1993/07 3/30/2007 5 to 40 years NY 437 1,794 702 437 2,496 2,933 600 1998 3/30/2007 5 to 40 years NY 638 2,531 2,939 638 5,470 6,108 853 1997 3/30/2007 5 to 40 years NY 348 1,344 474 348 1,818 2,166 435 1998 3/30/2007 5 to 40 years NY 323 1,331 249 323 1,580 1,903 409 1998 3/30/2007 5 to 40 years NY 315 2,185 1,143 316 3,327 3,643 774 1999/00 3/30/2007 5 to 40 years NY 961 3,827 2,637 961 6,464 7,425 1,288 1999 3/30/2007 5 to 40 years NY 375 1,498 649 375 2,147 2,522 505 1990/95 3/30/2007 5 to 40 years NY 1,003 4,002 144 1,003 4,146 5,149 1,051 1999 3/30/2007 5 to 40 years TX 676 2,685 431 676 3,116 3,792 814 2003/06 5/21/2007 5 to 40 years AL 1,607 6,338 1,085 1,677 7,353 9,030 1,771 1989/06 6/1/2007 5 to 40 years AL 1,016 4,013 454 1,017 4,466 5,483 1,130 1993/07 6/1/2007 5 to 40 years MS 1,423 5,624 197 1,423 5,821 7,244 1,469 1998/05 6/1/2007 5 to 40 years AL 1,206 4,775 365 1,206 5,140 6,346 1,266 1998/06 6/1/2007 5 to 40 years AL 1,216 4,819 359 1,216 5,178 6,394 1,331 2000/07 6/1/2007 5 to 40 years MS 1,345 5,325 120 1,301 5,489 6,790 1,360 2002/04 6/1/2007 5 to 40 years AL 1,164 4,624 297 1,164 4,921 6,085 1,233 2002/06 6/1/2007 5 to 40 years AL 1,346 5,474 1,575 1,346 7,049 8,395 1,512 2003/06 6/1/2007 5 to 40 years FL 1,029 4,180 194 1,029 4,374 5,403 1,178 2003/06 6/1/2007 5 to 40 years AL 686 2,732 242 686 2,974 3,660 775 2003 6/1/2007 5 to 40 years MS 1,811 7,152 140 1,811 7,292 9,103 1,782 2004/06 6/1/2007 5 to 40 years FL 732 3,015 82 732 3,097 3,829 822 2006 6/1/2007 5 to 40 years AL 1,075 4,333 302 1,075 4,635 5,710 1,166 2006 6/1/2007 5 to 40 years AL 885 3,586 253 885 3,839 4,724 945 2006 6/1/2007 5 to 40 years TX 742 3,024 246 742 3,270 4,012 855 2002/05 11/14/2007 5 to 40 years MS 444 1,799 228 444 2,027 2,471 521 1998 12/19/2007 5 to 40 years MS 384 1,548 139 384 1,687 2,071 405 2000 12/19/2007 5 to 40 years AL 437 1,757 207 437 1,964 2,401 461 2000 12/19/2007 5 to 40 years
Description Lafayette Lafayette Lafayette Manchester Nashua Clearwater-Largo Clearwater-Pinellas Park Clearwater-Tarpon Springs New Orleans St Louis-Meramec St Louis-Charles Rock St Louis-Shackelford St Louis-W.Washington St Louis-Howdershell St Louis-Lemay Ferry St Louis-Manchester Dallas-Fort Worth Dallas-Fort Worth Dallas-Fort Worth Dallas-Fort Worth Dallas-Fort Worth Dallas-Fort Worth San Antonio-Blanco San Antonio-Broadway San Antonio-Huebner Chattanooga-Lee Hwy II Lafayette Montgomery-E.S.Blvd Auburn-Pepperell Pkwy Auburn-Gatewood Dr Columbus-Williams Rd Columbus-Miller Rd Columbus-Armour Rd Columbus-Amber Dr Concord Buffalo-Langner Rd Buffalo-Transit Rd Buffalo-Lake Ave Buffalo-Union Rd Buffalo-Niagara Falls Blvd Buffalo-Young St Buffalo-Sheridan Dr Buffalo-Transit Rd Rochester-Phillips Rd Greenville Houston-Beaumont Houston-Beaumont Huntsville-Memorial Pkwy Huntsville-Madison 1 Bilox-Gulfport Description Jackson-Ridgeland Jackson-5111 Cincinnati-Robertson Richmond-Bridge Rd Raleigh-Durham Charlotte-Wallace Raleigh-Durham Charlotte-Westmoreland Charlotte-Matthews Raleigh-Durham Charlotte-Zeb Morris Fair Lawn Elizabeth Saint Louis-High Ridge Atlanta-Decatur Houston-Humble Dallas-Fort Worth Houston-Hwy 6N Austin-Cedar Park Houston-Katy Houston-Deer Park Houston-W. Little York Houston-Pasadena Houston-Friendswood Houston-Spring Houston-W. Sam Houston Austin-Pond Springs Rd Houston-Spring Austin-Round Rock Houston-Silverado Dr Houston-Sugarland Houston-Westheimer Rd Houston-Wilcrest Dr Houston-Woodlands Houston-Woodlands Houston-Katy Freeway Houston-Webster Newport News-Brick Kiln Pensacola-Palafox Miami Chicago - Lake Forest Chicago - Schaumburg Norfolk - E. Little Creek Atlanta-14th St. Jacksonville - Middleburg Jacksonville - Orange Park Jacksonville - St. Augustine Atlanta - NE Expressway Atlanta - Kennesaw Atlanta - Lawrenceville Atlanta - Woodstock Raleigh-Durham Chicago - Lindenhurst Chicago - Orland Park Phoenix-83rd Chicago-North Austin Chicago-North Western Chicago-West Pershing Chicago - North Broadway Brandenton Ft. Myers-Cleveland Clearwater-Drew St. Clearwater-N. Myrtle Initial Cost to Company Cost Capitalized
Subsequent to
Acquisition Gross Amount at Which
Carried at Close of Period ST Encum
brance Land Building,
Equipment
and Impvmts Building,
Equipment
and
Impvmts Land Building,
Equipment
and
Impvmts Total Accum.
Deprec. Date of
Const.�� Date
Acquired Life on
which depr
in latest
income
statement
is computed LA 463 1,831 188 463 2,019 2,482 465 2001/04 4/13/2006 5 to 40 years LA 601 2,406 1,362 601 3,768 4,369 839 2002 4/13/2006 5 to 40 years LA 542 1,319 2,184 542 3,503 4,045 711 1997/99 4/13/2006 5 to 40 years NH 832 3,268 149 832 3,417 4,249 785 2000 4/26/2006 5 to 40 years NH 617 2,422 564 617 2,986 3,603 664 1989 6/29/2006 5 to 40 years FL 1,270 5,037 233 1,270 5,270 6,540 1188 1998 6/22/2006 5 to 40 years FL 929 3,676 304 929 3,980 4,909 861 2000 6/22/2006 5 to 40 years FL 696 2,739 172 696 2,911 3,607 660 1999 6/22/2006 5 to 40 years LA 1,220 4,805 215 1,220 5,020 6,240 1132 2000 6/22/2006 5 to 40 years MO 1,113 4,359 361 1,113 4,720 5,833 1051 1999 6/22/2006 5 to 40 years MO 766 3,040 1,434 766 4,474 5,240 752 1999 6/22/2006 5 to 40 years MO 828 3,290 199 828 3,489 4,317 785 1999 6/22/2006 5 to 40 years MO 734 2,867 778 734 3,645 4,379 857 1980/01 6/22/2006 5 to 40 years MO 899 3,596 298 899 3,894 4,793 861 2000 6/22/2006 5 to 40 years MO 890 3,552 397 890 3,949 4,839 864 1999 6/22/2006 5 to 40 years MO 697 2,711 157 697 2,868 3,565 642 2000 6/22/2006 5 to 40 years TX 1,256 4,946 377 1,256 5,323 6,579 1169 1998/03 6/22/2006 5 to 40 years TX 605 2,434 141 605 2,575 3,180 567 2004 6/22/2006 5 to 40 years TX 607 2,428 177 607 2,605 3,212 579 2004 6/22/2006 5 to 40 years TX 1,073 4,276 77 1,073 4,353 5,426 970 2003 6/22/2006 5 to 40 years TX 549 2,180 1,153 549 3,333 3,882 615 1998 6/22/2006 5 to 40 years TX 644 2,542 136 644 2,678 3,322 594 1999 6/22/2006 5 to 40 years TX 963 3,836 195 963 4,031 4,994 908 2004 6/22/2006 5 to 40 years TX 773 3,060 1,932 773 4,992 5,765 811 2000 6/22/2006 5 to 40 years TX 1,175 4,624 313 1,175 4,937 6,112 1060 1998 6/22/2006 5 to 40 years TN 619 2,471 141 619 2,612 3,231 574 2002 8/7/2006 5 to 40 years LA 699 2,784 1,993 699 4,777 5,476 987 1995/99 8/1/2006 5 to 40 years AL 1,158 4,639 944 1,158 5,583 6,741 1200 1996/97 9/28/2006 5 to 40 years AL 590 2,361 446 590 2,807 3,397 584 1998 9/28/2006 5 to 40 years AL 694 2,758 252 694 3,010 3,704 632 2002/03 9/28/2006 5 to 40 years GA 736 2,905 239 736 3,144 3,880 693 2002/04/06 9/28/2006 5 to 40 years GA 975 3,854 1,290 975 5,144 6,119 807 1995 9/28/2006 5 to 40 years GA 0 3,680 211 0 3,891 3,891 835 2004/05 9/28/2006 5 to 40 years GA 439 1,745 265 439 2,010 2,449 427 1998 9/28/2006 5 to 40 years NH 813 3,213 2,009 813 5,222 6,035 1007 2000 10/31/2006 5 to 40 years NY 532 2,119 2,721 532 4,840 5,372 641 1993/07 3/30/2007 5 to 40 years NY 437 1,794 669 437 2,463 2,900 470 1998 3/30/2007 5 to 40 years NY 638 2,531 614 638 3,145 3,783 654 1997 3/30/2007 5 to 40 years NY 348 1,344 280 348 1,624 1,972 328 1998 3/30/2007 5 to 40 years NY 323 1,331 147 323 1,478 1,801 308 1998 3/30/2007 5 to 40 years NY 315 2,185 998 316 3,182 3,498 595 1999/00 3/30/2007 5 to 40 years NY 961 3,827 2,480 961 6,307 7,268 935 1999 3/30/2007 5 to 40 years NY 375 1,498 344 375 1,842 2,217 414 1990/95 3/30/2007 5 to 40 years NY 1,003 4,002 123 1,003 4,125 5,128 824 1999 3/30/2007 5 to 40 years MS 1,100 4,386 648 1,100 5,034 6,134 1033 1994 1/11/2007 5 to 40 years TX 929 3,647 181 930 3,827 4,757 795 2002/04 3/8/2007 5 to 40 years TX 1,537 6,018 455 1,537 6,473 8,010 1298 2003/06 3/8/2007 5 to 40 years AL 1,607 6,338 982 1,677 7,250 8,927 1352 1989/06 6/1/2007 5 to 40 years AL 1,016 4,013 339 1,017 4,351 5,368 881 1993/07 6/1/2007 5 to 40 years MS 1,423 5,624 173 1,423 5,797 7,220 1142 1998/05 6/1/2007 5 to 40 years Initial Cost to Company Cost
Capitalized
Subsequent
to
Acquisition Gross Amount at Which
Carried at Close of Period Life on
which
depreciation Encum Building,
Equipment
and Building,
Equipment
and Building,
Equipment
and Accum. Date of Date in latest
income
statement ST brance Land Impvmts. Impvmts. Land Impvmts. Total Deprec. Const. Acquired is completed MS 1,479 5,965 546 1,479 6,511 7,990 1,529 1997/00 1/17/2008 5 to 40 years MS 1,337 5,377 240 1,337 5,617 6,954 1,308 2003 1/17/2008 5 to 40 years OH 852 3,409 274 852 3,683 4,535 772 2003/04 12/31/2008 5 to 40 years VA 1,047 5,981 2,729 1,047 8,710 9,757 1,334 2009 10/1/2009 5 to 40 years NC 846 4,095 194 846 4,289 5,135 691 2000 12/28/2010 5 to 40 years NC 961 3,702 1,216 961 4,918 5,879 667 2008 12/29/2010 5 to 40 years NC 574 3,975 244 574 4,219 4,793 661 2008 12/29/2010 5 to 40 years NC 513 5,317 40 513 5,357 5,870 849 2009 12/29/2010 5 to 40 years NC 1,129 4,767 125 1,129 4,892 6,021 794 2009 12/29/2010 5 to 40 years NC 381 3,575 92 381 3,667 4,048 585 2008 12/29/2010 5 to 40 years NC 965 3,355 103 965 3,458 4,423 555 2007 12/29/2010 5 to 40 years NJ 796 9,467 312 796 9,779 10,575 1,388 1999 7/14/2011 5 to 40 years NJ 885 3,073 652 885 3,725 4,610 498 1988 7/14/2011 5 to 40 years MO 197 2,132 63 197 2,195 2,392 392 2007 7/28/2011 5 to 40 years GA 1,043 8,252 84 1,043 8,336 9,379 1,145 2006 8/17/2011 5 to 40 years TX 825 4,201 325 825 4,526 5,351 679 1993 9/22/2011 5 to 40 years TX 693 3,552 121 693 3,673 4,366 545 2001 9/22/2011 5 to 40 years TX 1,243 3,106 128 1,243 3,234 4,477 499 2000 9/22/2011 5 to 40 years TX 1,559 2,727 91 1,559 2,818 4,377 440 1998 9/22/2011 5 to 40 years TX 691 4,435 2,478 691 6,913 7,604 801 2000 9/22/2011 5 to 40 years TX 1,012 3,312 222 1,012 3,534 4,546 512 1998 9/22/2011 5 to 40 years TX 575 3,557 185 575 3,742 4,317 586 1998 9/22/2011 5 to 40 years TX 705 4,223 206 705 4,429 5,134 651 2000 9/22/2011 5 to 40 years TX 1,168 2,315 215 1,168 2,530 3,698 391 1994 9/22/2011 5 to 40 years TX 2,152 3,027 330 2,152 3,357 5,509 528 1993 9/22/2011 5 to 40 years TX 402 3,602 259 402 3,861 4,263 542 1999 9/22/2011 5 to 40 years TX 1,653 4,947 409 1,653 5,356 7,009 741 1984 9/22/2011 5 to 40 years TX 1,474 4,500 31 1,456 4,549 6,005 678 2006 9/22/2011 5 to 40 years TX 177 3,223 143 177 3,366 3,543 493 1999 9/22/2011 5 to 40 years TX 1,438 4,583 128 1,438 4,711 6,149 680 2000 9/22/2011 5 to 40 years TX 272 3,236 196 272 3,432 3,704 526 2001 9/22/2011 5 to 40 years TX 536 2,687 167 536 2,854 3,390 430 1997 9/22/2011 5 to 40 years TX 1,478 4,145 173 1,478 4,318 5,796 606 1999 9/22/2011 5 to 40 years TX 1,315 6,142 222 1,315 6,364 7,679 880 1997 9/22/2011 5 to 40 years TX 3,189 3,974 177 3,189 4,151 7,340 581 2000 9/22/2011 5 to 40 years TX 1,049 5,175 517 1,049 5,692 6,741 805 1999 9/22/2011 5 to 40 years TX 1,852 2,054 2,138 365 2,054 2,503 4,557 376 1982 9/22/2011 5 to 40 years VA 2,848 5,892 95 2,848 5,987 8,835 861 2004 9/29/2011 5 to 40 years FL 197 4,281 600 197 4,881 5,078 648 1996 11/15/2011 5 to 40 years FL 2,960 12,077 123 2,960 12,200 15,160 1,446 2005 5/16/2012 5 to 40 years IL 1,932 11,606 167 1,932 11,773 13,705 1,372 1996/2004 6/6/2012 5 to 40 years IL 1,940 4,880 292 1,940 5,172 7,112 621 1998 6/6/2012 5 to 40 years VA 911 5,862 73 911 5,935 6,846 723 2007 6/20/2012 5 to 40 years GA 1,560 6,766 27 1,560 6,793 8,353 798 2009 7/18/2012 5 to 40 years FL 644 5,719 78 644 5,797 6,441 676 2008 9/18/2012 5 to 40 years FL 772 3,882 76 772 3,958 4,730 490 2007 9/18/2012 5 to 40 years FL 739 3,858 63 739 3,921 4,660 475 2007 9/18/2012 5 to 40 years GA 1,384 9,266 77 1,384 9,343 10,727 1,058 2009 9/18/2012 5 to 40 years GA 856 4,315 67 856 4,382 5,238 491 2008 9/18/2012 5 to 40 years GA 855 3,838 122 855 3,960 4,815 482 2007 9/18/2012 5 to 40 years GA 1,342 4,692 96 1,342 4,788 6,130 578 2009 9/18/2012 5 to 40 years NC 2,337 4,901 219 2,337 5,120 7,457 608 2002 9/19/2012 5 to 40 years IL 1,213 3,129 207 1,213 3,336 4,549 382 1999/2006 9/27/2012 5 to 40 years IL 1,050 5,894 160 1,050 6,054 7,104 650 2007 12/10/2012 5 to 40 years AZ 910 3,656 162 910 3,818 4,728 418 2008 12/18/2012 5 to 40 years IL 2,593 5,029 240 2,593 5,269 7,862 548 2005 12/20/2012 5 to 40 years IL 1,718 6,466 643 1,798 7,029 8,827 695 2005 12/20/2012 5 to 40 years IL 395 3,226 105 395 3,331 3,726 340 2008 12/20/2012 5 to 40 years IL 2,373 9,869 126 2,373 9,995 12,368 1,010 2011 12/20/2012 5 to 40 years FL 1,501 3,775 186 1,501 3,961 5,462 422 1997 12/21/2012 5 to 40 years FL 515 2,280 138 515 2,418 2,933 275 1998 12/21/2012 5 to 40 years FL 1,234 4,018 126 1,234 4,144 5,378 458 2000 12/21/2012 5 to 40 years FL 1,555 5,978 141 1,555 6,119 7,674 654 2000 12/21/2012 5 to 40 years
Description Huntsville-Hwy 72 Mobile-Airport Blvd Bilox-Gulfport Huntsville-Madison 2 Foley-Hwy 59 Pensacola 6-Nine Mile Auburn-College St Biloxi-Gulfport Pensacola 7-Hwy 98 Montgomery-Arrowhead Montgomery-McLemore San Antonio-Foster Houston-Beaumont Hattiesburg-Clasic Biloxi-Ginger Foley-7905 St Hwy 59 Jackson-Ridgeland Jackson-5111 Cincinnati-Robertson Richmond-Bridge Rd Raleigh-Durham Charlotte-Wallace Raleigh-Durham Charlotte-Westmoreland Charlotte-Matthews Raleigh-Durham Charlotte-Zeb Morris Fair Lawn-Wagaraw Elizabeth-Allen Saint Louis-High Ridge Atlanta-Decatur Houston-Humble Dallas-Fort Worth Houston-Hwy 6N Austin-Cedar Park Houston-Katy Houston-Deer Park Houston-W.Little York Houston-Pasadena Houston-Friendswood Houston-Spring Houston-W.Sam Houston Austin-Pond Springs Rd Houston-Spring Austin-Round Rock Houston-Silverado Dr Houston-Sugarland Houston-Westheimer Rd Houston-Wilcrest Dr Houston-Woodlands Houston-Woodlands Description Austin-Cedar Park Austin-Round Rock Austin-Round Rock Chicago-Aurora San Antonio - Marbach Long Island - Lindenhurst Boston - Somerville Long Island - Deer Park Long Island - Amityville Colorado Springs - Scarlet Toms River - Route 37 W Lake Worth - S Military Austin-Round Rock Hartford-Bristol Piscataway–New Brunswick Fort Lauderdale - 3rd Ave West Palm - Mercer Austin - Manchaca San Antonio Portland Portland-Topsham Chicago - St. Charles Chicago - Ashland San Antonio - Walzem St. Louis - Woodson St. Louis - Mexico St. Louis - Vogel St. Louis - Manchester St. Louis - North Highway St. Louis - Dunn Trenton-Hamilton Twnship NY Metro-Fishkill Atlanta-Peachtree City Wayne - Willowbrook Asbury Park - 1st Ave Farmingdale - Tinton Falls Lakewood - Route 70 Matawan - Highway 34 St. Petersburg - Gandy Chesapeake - Campostella San Antonio-Castle Hills Chattanooga - Broad St New Orleans-Kenner Orlando-Celebration Austin-Cedar Park Chicago - Pulaski Houston - Gessner New England - Danbury New England - Milford Long Island - Hicksville Long Island - Farmingdale Chicago - Alsip Chicago - N. Pulaski Fort Myers - Tamiami Trail Dallas - Allen Jacksonville - Beach Blvd. Space Coast - Vero Beach Port St. Lucie - Federal Hwy West Palm - N. Military Ft. Myers - Bonita Springs Phoenix - Tatum Blvd. Boston - Lynn Syracuse - Ainsely Dr. Initial Cost to Company Cost Capitalized
Subsequent to
Acquisition Gross Amount at Which
Carried at Close of Period ST Encum
brance Land Building,
Equipment
and Impvmts Building,
Equipment
and
Impvmts Land Building,
Equipment
and
Impvmts Total Accum.
Deprec. Date of
Const. Date
Acquired Life on
which depr
in latest
income
statement
is computed AL 1,206 4,775 288 1,206 5,063 6,269 988 1998/06 6/1/2007 5 to 40 years AL 1,216 4,819 334 1,216 5,153 6,369 1043 2000/07 6/1/2007 5 to 40 years MS 1,345 5,325 62 1,301 5,431 6,732 1054 2002/04 6/1/2007 5 to 40 years AL 1,164 4,624 265 1,164 4,889 6,053 958 2002/06 6/1/2007 5 to 40 years AL 1,346 5,474 310 1,347 5,783 7,130 1154 2003/06 6/1/2007 5 to 40 years FL 1,029 4,180 171 1,029 4,351 5,380 927 2003/06 6/1/2007 5 to 40 years AL 686 2,732 200 686 2,932 3,618 598 2003 6/1/2007 5 to 40 years MS 1,811 7,152 112 1,811 7,264 9,075 1400 2004/06 6/1/2007 5 to 40 years FL 732 3,015 70 732 3,085 3,817 645 2006 6/1/2007 5 to 40 years AL 1,075 4,333 196 1,076 4,528 5,604 884 2006 6/1/2007 5 to 40 years AL 885 3,586 155 885 3,741 4,626 722 2006 6/1/2007 5 to 40 years TX 676 2,685 357 676 3,042 3,718 625 2003/06 5/21/2007 5 to 40 years TX 742 3,024 189 742 3,213 3,955 619 2002/05 11/14/2007 5 to 40 years MS 444 1,799 163 444 1,962 2,406 372 1998 12/19/2007 5 to 40 years MS 384 1,548 103 384 1,651 2,035 300 2000 12/19/2007 5 to 40 years AL 437 1,757 190 437 1,947 2,384 344 2000 12/19/2007 5 to 40 years MS 1,479 5,965 457 1,479 6,422 7,901 1163 1997/00 1/17/2008 5 to 40 years MS 1,337 5,377 143 1,337 5,520 6,857 990 2003 1/17/2008 5 to 40 years OH 852 3,409 200 852 3,609 4,461 564 2003/04 12/31/2008 5 to 40 years VA 1,047 5,981 36 1,047 6,017 7,064 909 2009 10/1/2009 5 to 40 years NC 846 4,095 100 846 4,195 5,041 445 2000 12/28/2010 5 to 40 years NC 961 3,702 536 961 4,238 5,199 412 2008 12/29/2010 5 to 40 years NC 574 3,975 103 575 4,077 4,652 427 2008 12/29/2010 5 to 40 years NC 513 5,317 36 513 5,353 5,866 552 2009 12/29/2010 5 to 40 years NC 1,129 4,767 84 1,129 4,851 5,980 514 2009 12/29/2010 5 to 40 years NC 381 3,575 46 381 3,621 4,002 381 2008 12/29/2010 5 to 40 years NC 965 3,355 57 965 3,412 4,377 358 2007 12/29/2010 5 to 40 years PA 796 9,467 78 796 9,545 10,341 881 1999 7/14/2011 5 to 40 years PA 885 3,073 487 885 3,560 4,445 277 1988 7/14/2011 5 to 40 years MO 197 2,132 37 197 2,169 2,366 237 2007 7/28/2011 5 to 40 years GA 1,043 8,252 67 1,043 8,319 9,362 719 2006 8/17/2011 5 to 40 years TX 825 4,201 323 825 4,524 5,349 413 1993 9/22/2011 5 to 40 years TX 693 3,552 101 693 3,653 4,346 337 2001 9/22/2011 5 to 40 years TX 1,243 3,106 95 1,243 3,201 4,444 304 2000 9/22/2011 5 to 40 years TX 1,559 2,727 64 1,559 2,791 4,350 270 1998 9/22/2011 5 to 40 years TX 691 4,435 126 691 4,561 5,252 414 2000 9/22/2011 5 to 40 years TX 1,012 3,312 164 1,012 3,476 4,488 309 1998 9/22/2011 5 to 40 years TX 575 3,557 135 575 3,692 4,267 356 1998 9/22/2011 5 to 40 years TX 705 4,223 146 705 4,369 5,074 394 2000 9/22/2011 5 to 40 years TX 1,168 2,315 164 1,168 2,479 3,647 239 1994 9/22/2011 5 to 40 years TX 2,152 3,027 275 2,152 3,302 5,454 314 1993 9/22/2011 5 to 40 years TX 402 3,602 187 402 3,789 4,191 321 1999 9/22/2011 5 to 40 years TX 1,653 4,947 223 1,653 5,170 6,823 448 1984 9/22/2011 5 to 40 years TX 1,474 4,500 67 1,474 4,567 6,041 414 2006 9/22/2011 5 to 40 years TX 177 3,223 91 177 3,314 3,491 305 1999 9/22/2011 5 to 40 years TX 1,438 4,583 123 1,438 4,706 6,144 418 2000 9/22/2011 5 to 40 years TX 272 3,236 162 272 3,398 3,670 320 2001 9/22/2011 5 to 40 years TX 536 2,687 142 536 2,829 3,365 258 1997 9/22/2011 5 to 40 years TX 1,478 4,145 141 1,478 4,286 5,764 373 1999 9/22/2011 5 to 40 years TX 1,315 6,142 195 1,315 6,337 7,652 535 1997 9/22/2011 5 to 40 years TX 3,189 3,974 147 3,189 4,121 7,310 348 2000 9/22/2011 5 to 40 years Initial Cost to Company Cost
Capitalized
Subsequent
to
Acquisition Gross Amount at Which
Carried at Close of Period Life on
which
depreciation Encum Building,
Equipment
and Building,
Equipment
and Building,
Equipment
and Accum. Date of Date in latest
income
statement ST brance Land Impvmts. Impvmts. Land Impvmts. Total Deprec. Const. Acquired is completed TX 1,246 5,740 155 1,246 5,895 7,141 615 2006 12/27/2012 5 to 40 years TX 774 3,327 146 774 3,473 4,247 363 2004 12/27/2012 5 to 40 years TX 632 1,985 88 632 2,073 2,705 244 2007 12/27/2012 5 to 40 years IL 269 3,126 320 269 3,446 3,715 336 2010 12/31/2012 5 to 40 years TX 337 2,005 191 337 2,196 2,533 238 2005 2/11/2013 5 to 40 years NY 2,122 8,735 517 2,122 9,252 11,374 857 2002 3/22/2013 5 to 40 years MA 1,553 7,186 21 1,506 7,254 8,760 727 2008 3/22/2013 5 to 40 years NY 1,096 8,276 89 1,096 8,365 9,461 731 2009 8/29/2013 5 to 40 years NY 2,224 10,102 46 2,224 10,148 12,372 879 2009 8/29/2013 5 to 40 years CO 629 5,201 184 629 5,385 6,014 442 2006 9/30/2013 5 to 40 years NJ 1,843 6,544 99 1,843 6,643 8,486 575 2007 11/26/2013 5 to 40 years FL 868 5,306 709 868 6,015 6,883 490 2000 12/4/2013 5 to 40 years TX 1,547 5,226 153 1,547 5,379 6,926 449 2008 12/27/2013 5 to 40 years CT 1,174 8,816 81 1,174 8,897 10,071 674 2004 12/30/2013 5 to 40 years NJ 1,639 10,946 83 1,639 11,029 12,668 862 2006 12/30/2013 5 to 40 years FL 7,629 11,918 199 7,629 12,117 19,746 949 1998 1/9/2014 5 to 40 years FL 15,680 17,520 504 15,680 18,024 33,704 1,437 2000 1/9/2014 5 to 40 years TX 3,999 4,297 665 3,999 4,962 8,961 409 1998/2002 1/17/2014 5 to 40 years TX 2,235 6,269 328 2,235 6,597 8,832 514 2012 2/10/2014 5 to 40 years ME 2,146 6,418 235 2,146 6,653 8,799 525 2000 2/11/2014 5 to 40 years ME 493 5,234 98 493 5,332 5,825 411 2006 2/11/2014 5 to 40 years IL 1,837 6,301 538 1,837 6,839 8,676 506 2004/2013 3/31/2014 5 to 40 years IL 598 4,789 178 598 4,967 5,565 355 2014 5/5/2014 5 to 40 years TX 2,000 3,749 495 2,000 4,244 6,244 316 1997 5/13/2014 5 to 40 years MO 2,444 5,966 1,587 2,444 7,553 9,997 549 1998 5/22/2014 5 to 40 years MO 638 3,518 1,778 638 5,296 5,934 336 1998 5/22/2014 5 to 40 years MO 2,010 3,544 232 2,010 3,776 5,786 303 2000 5/22/2014 5 to 40 years MO 508 2,042 396 508 2,438 2,946 201 1996 5/22/2014 5 to 40 years MO 1,989 4,045 567 1,989 4,612 6,601 365 1997 5/22/2014 5 to 40 years MO 1,538 4,510 386 1,538 4,896 6,434 390 2000 5/22/2014 5 to 40 years NJ 5,161 7,063 841 5,161 7,904 13,065 522 1980 6/5/2014 5 to 40 years NY 1,741 6,006 309 1,741 6,315 8,056 424 2005 6/11/2014 5 to 40 years GA 2,263 4,931 440 2,263 5,371 7,634 392 2007 6/12/2014 5 to 40 years NJ 0 2,292 196 0 2,488 2,488 411 2000 6/12/2014 5 to 40 years NJ 819 4,734 548 819 5,282 6,101 368 2003 6/18/2014 5 to 40 years NJ 1,097 5,618 320 1,097 5,938 7,035 425 2004 6/18/2014 5 to 40 years NJ 626 4,549 188 626 4,737 5,363 316 2003 6/18/2014 5 to 40 years NJ 1,512 9,707 724 1,512 10,431 11,943 668 2005 7/10/2014 5 to 40 years FL 2,958 6,904 217 2,958 7,121 10,079 446 2007 8/28/2014 5 to 40 years VA 2,349 3,875 282 2,349 4,157 6,506 272 2000 9/5/2014 5 to 40 years TX 2,658 8,190 415 4,544 6,719 11,263 424 2002 9/10/2014 5 to 40 years TN 759 5,608 181 759 5,789 6,548 366 2014 9/18/2014 5 to 40 years LA 5,771 10,375 427 5,771 10,802 16,573 652 2008 10/10/2014 5 to 40 years FL 6,091 4,641 356 6,091 4,997 11,088 297 2006 10/21/2014 5 to 40 years TX 4,196 8,374 547 4,196 8,921 13,117 510 2003 10/28/2014 5 to 40 years IL 889 4,700 624 889 5,324 6,213 293 2014 11/14/2014 5 to 40 years TX 1,599 5,813 508 1,599 6,321 7,920 343 2006 12/18/2014 5 to 40 years CT 9,747 18,374 80 9,747 18,454 28,201 892 1999 2/2/2015 5 to 40 years CT 9,642 23,352 117 9,642 23,469 33,111 1,139 1999 2/2/2015 5 to 40 years NY 5,153 27,401 158 5,153 27,559 32,712 1,392 2002 2/2/2015 5 to 40 years NY 4,931 20,415 94 4,931 20,509 25,440 994 2000 2/2/2015 5 to 40 years IL 2,579 4,066 84 2,579 4,150 6,729 204 1986 2/5/2015 5 to 40 years IL 1,719 6,971 372 1,719 7,343 9,062 344 2015 3/9/2015 5 to 40 years FL 1,793 4,382 158 1,793 4,540 6,333 234 2004 4/1/2015 5 to 40 years TX 3,864 4,777 224 3,864 5,001 8,865 226 2002 4/16/2015 5 to 40 years FL 2,118 6,501 67 2,118 6,568 8,686 312 2013 4/21/2015 5 to 40 years FL 1,169 4,409 324 1,169 4,733 5,902 204 1997 5/1/2015 5 to 40 years FL 4,957 6,045 201 4,957 6,246 11,203 293 2001 5/1/2015 5 to 40 years FL 3,372 4,206 134 3,372 4,340 7,712 216 1985 5/1/2015 5 to 40 years FL 2,687 5,012 212 2,687 5,224 7,911 250 2000 5/1/2015 5 to 40 years AZ 852 7,052 159 852 7,211 8,063 302 2015 6/16/2015 5 to 40 years MA 2,110 8,182 79 2,110 8,261 10,371 379 2015 6/16/2015 5 to 40 years NY 2,711 3,795 109 2,711 3,904 6,615 171 2000 8/25/2015 5 to 40 years
Description Houston-Katy Freeway Houston-Webster Newport News-Brick Kiln Pensacola Miami Chicago - Lake Forest Chicago - Schaumburg Norfolk - East Little Creek Atlanta Jacksonville - Middleburg Jacksonville - Orange Park St. Augustine Atlanta - NE Expressway Atlanta - Kennesaw Atlanta - Lawrenceville Atlanta - Woodstock Raleigh-Durham Chicago - Lindenhurst Chicago - Orland Park Bradenton Ft. Myers - Cleveland Ave. Clearwater - Drew St. Clearwater - North Myrtle Chicago - Aurora Phoenix Chicago - North Austin Chicago - North Western Chicago - West Pershing Austin-Cedar Park Chicago - North Broadway Austin-Round Rock Austin-Round Rock San Antonio - Marbach Long Island - Lindenhurst Boston - Somerville Long Island - Deer Park Long Island - Amityville Colorado Springs - Scarlet Toms River - Route 37 W Lake Worth - S Military Austin-Round Rock Hartford-Bristol Piscataway - New Brunswick Fort Lauderdale - 3rd Ave West Palm - Mercer Austin - Manchaca Description Syracuse - Cicero Syracuse - Camillus Syracuse - Manlius Charlotte - Brookshire Blvd. Charleston III Myrtle Beach II Columbia VI Hilton Head - Bluffton Philadelphia - Eagleville Orlando - University Orlando - N. Powers Sarasota - North Port Los Angeles – Commercial Los Angeles - E. Slauson Los Angeles - Westminster Los Angeles - Calabasas Portsmouth - Kingston Portsmouth - Danville Portsmouth - Hampton Falls Portsmouth - Lee Portsmouth - Heritage Boston - Salisbury Dallas - Frisco Dallas - McKinney Dallas - McKinney Phoenix - 48th Miami Philadelphia - Glenolden Denver - Thornton Los Angeles - Costa Mesa Los Angeles - Irving Los Angeles - Durante Los Angeles - Wildomar Los Angeles - Torrance New Haven - Wallingford New Haven - Waterbury New York - Mahopac New York - Mount Vernon Pt. St. Lucie Dallas - Lewisville Buffalo - Cayuga Buffalo - Lackawanna Austin - S. Congress Austin - W Braker Austin - Highway 290 Austin - Killeen Austin - Round Rock Austin - Georgetown Austin - Pflugerville Chicago - Algonquin Chicago - Carpentersville Chicago - W. Addison Chicago - State St. Chicago-W. Grand Chicago - Libertyville Chicago - Aurora Chicago - Morton Grove Chicago - Bridgeview Chicago - Addison Chicago - W Diversey Chicago - Elmhurst Chicago - Elgin Chicago - N. Paulina St., Initial Cost to Company Cost Capitalized
Subsequent to
Acquisition Gross Amount at Which
Carried at Close of Period ST Encum
brance Land Building,
Equipment
and
Impvmts Building,
Equipment
and
Impvmts Land Building,
Equipment
and
Impvmts Total Accum.
Deprec. Date of
Const. Date
Acquired Life on
which depr
in latest
income
statement
is computed TX 1,049 5,175 501 1,049 5,676 6,725 486 1999 9/22/2011 5 to 40 years TX 2,127 2,054 2,138 368 2,054 2,506 4,560 229 1982 9/22/2011 5 to 40 years VA 2,848 5,892 60 2,848 5,952 8,800 527 2004 9/29/2011 5 to 40 years FL 197 4,281 158 197 4,439 4,636 372 1996 11/15/2011 5 to 40 years FL 2,960 12,077 91 2,960 12,168 15,128 796 2005 5/16/2012 5 to 40 years IL 1,932 11,606 79 1,932 11,685 13,617 770 1996/2004 6/6/2012 5 to 40 years IL 1,940 4,880 205 1,940 5,085 7,025 346 1998 6/6/2012 5 to 40 years VA 911 5,862 47 911 5,909 6,820 393 2007 6/20/2012 5 to 40 years GA 1,560 6,766 53 1,560 6,819 8,379 443 2009 7/18/2012 5 to 40 years FL 664 5,719 26 644 5,765 6,409 343 2008 9/18/2012 5 to 40 years FL 772 3,882 66 772 3,948 4,720 240 2007 9/18/2012 5 to 40 years FL 739 3,858 53 739 3,911 4,650 242 2007 9/18/2012 5 to 40 years GA 1,384 9,266 46 1,384 9,312 10,696 554 2009 9/18/2012 5 to 40 years GA 856 4,315 46 856 4,361 5,217 263 2008 9/18/2012 5 to 40 years GA 855 3,838 76 855 3,914 4,769 238 2007 9/18/2012 5 to 40 years GA 1,342 4,692 69 1,342 4,761 6,103 291 2009 9/18/2012 5 to 40 years NC 2,337 4,901 115 2,337 5,016 7,353 299 2002 9/19/2012 5 to 40 years IL 1,213 3,129 89 1,213 3,218 4,431 199 1999/2006 9/27/2012 5 to 40 years IL 1,050 5,894 81 1,050 5,975 7,025 331 2007 12/10/2012 5 to 40 years FL 1,501 3,775 38 1,501 3,813 5,314 199 1997 12/21/2012 5 to 40 years FL 515 2,280 56 515 2,336 2,851 126 1998 12/21/2012 5 to 40 years FL 1,234 4,018 37 1,234 4,055 5,289 211 2000 12/21/2012 5 to 40 years FL 1,555 5,978 38 1,555 6,016 7,571 313 2000 12/21/2012 5 to 40 years IL 269 3,126 81 269 3,207 3,476 166 2010 12/31/2012 5 to 40 years AZ 910 3,656 73 910 3,729 4,639 206 2008 12/18/2012 5 to 40 years IL 2,593 5,029 144 2,593 5,173 7,766 272 2005 12/20/2012 5 to 40 years IL 1,718 6,466 295 1,718 6,761 8,479 339 2005 12/20/2012 5 to 40 years IL 395 3,226 68 395 3,294 3,689 168 2008 12/20/2012 5 to 40 years TX 1,246 5,740 54 1,246 5,794 7,040 306 2006 12/27/2012 5 to 40 years IL 2,373 9,869 24 2,373 9,893 12,266 505 2011 12/20/2012 5 to 40 years TX 774 3,327 61 774 3,388 4,162 177 2004 12/27/2012 5 to 40 years TX 632 1,985 54 632 2,039 2,671 121 2007 12/27/2012 5 to 40 years TX 337 2,005 144 337 2,149 2,486 112 2005 2/11/2013 5 to 40 years NY 2,122 8,735 102 2,122 8,837 10,959 401 2002 3/22/2013 5 to 40 years MA 1,553 7,186 62 1,553 7,248 8,801 328 2008 3/22/2013 5 to 40 years NY 1,096 8,276 90 1,096 8,366 9,462 291 2009 8/29/2013 5 to 40 years NY 2,224 10,102 69 2,224 10,171 12,395 352 2009 8/29/2013 5 to 40 years CO 629 5,201 135 629 5,336 5,965 170 2006 9/30/2013 5 to 40 years NJ 1,843 6,544 92 1,843 6,636 8,479 185 2007 11/26/2013 5 to 40 years FL 868 5,306 80 868 5,386 6,254 151 2000 12/4/2013 5 to 40 years TX 1,547 5,226 33 1,547 5,259 6,806 145 2008 12/27/2013 5 to 40 years CT 1,174 8,816 65 1,174 8,881 10,055 225 2004 12/30/2013 5 to 40 years NJ 1,639 10,946 52 1,639 10,998 12,637 277 2006 12/30/2013 5 to 40 years FL 7,629 11,918 159 7,629 12,077 19,706 307 1998 1/9/2014 5 to 40 years FL 15,680 17,520 396 15,680 17,916 33,596 461 2000 1/9/2014 5 to 40 years TX 3,999 4,297 592 3,999 4,889 8,888 127 1998/2002 1/17/2014 5 to 40 years Initial Cost to Company Cost
Capitalized
Subsequent
to
Acquisition Gross Amount at Which
Carried at Close of Period Life on
which
depreciation Encum Building,
Equipment
and Building,
Equipment
and Building,
Equipment
and Accum. Date of Date in latest
income
statement ST brance Land Impvmts. Impvmts. Land Impvmts. Total Deprec. Const. Acquired is completed NY 668 1,957 80 668 2,037 2,705 82 2002 8/25/2015 5 to 40 years NY 473 5,368 85 473 5,453 5,926 210 2005/2011 8/25/2015 5 to 40 years NY 834 1,705 45 834 1,750 2,584 64 2000 8/25/2015 5 to 40 years NC 718 2,977 805 718 3,782 4,500 150 2000 9/1/2015 5 to 40 years SC 7,604 9,086 169 7,604 9,255 16,859 322 2005 9/1/2015 5 to 40 years SC 2,511 6,147 219 2,511 6,366 8,877 253 1999 9/1/2015 5 to 40 years SC 3,640 3,452 64 3,640 3,516 7,156 153 2004/2008 9/1/2015 5 to 40 years SC 3,084 3,192 89 3,084 3,281 6,365 127 1998 9/1/2015 5 to 40 years PA 1,926 4,498 97 1,926 4,595 6,521 150 2010 12/30/2015 5 to 40 years FL 882 5,756 241 882 5,997 6,879 150 2001 1/6/2016 5 to 40 years FL 2,567 2,838 51 2,567 2,889 5,456 77 1997 1/6/2016 5 to 40 years FL 4,884 10,014 109 4,884 10,123 15,007 116 2001/2006 1/6/2016 5 to 40 years CA 6,512 12,352 327 6,512 12,679 19,191 319 2004 1/21/2016 5 to 40 years CA 3,998 13,547 220 3,998 13,767 17,765 323 2012 1/21/2016 5 to 40 years CA 4,636 14,826 107 4,636 14,933 19,569 347 2006 1/21/2016 5 to 40 years CA 13,274 10,419 333 13,274 10,752 24,026 267 2004/2014 1/21/2016 5 to 40 years NH 1,713 2,709 29 1,713 2,738 4,451 67 2003 1/21/2016 5 to 40 years NH 1,615 3,333 36 1,615 3,369 4,984 95 2003 1/21/2016 5 to 40 years NH 2,445 6,295 23 2,445 6,318 8,763 160 2005 1/21/2016 5 to 40 years NH 3,078 2,861 38 3,078 2,899 5,977 70 2000 1/21/2016 5 to 40 years NH 4,430 26,040 46 4,430 26,086 30,516 606 1985/1999 1/21/2016 5 to 40 years MA 4,880 6,342 71 4,880 6,413 11,293 182 2003 1/21/2016 5 to 40 years TX 6,191 5,088 140 6,191 5,228 11,419 128 2003 1/21/2016 5 to 40 years TX 8,097 7,047 62 8,097 7,109 15,206 174 2003 1/21/2016 5 to 40 years TX 5,508 6,462 61 5,508 6,523 12,031 156 2002 1/21/2016 5 to 40 years AZ 988 8,224 40 988 8,264 9,252 201 2015 2/1/2016 5 to 40 years FL 2,294 8,980 131 2,294 9,111 11,405 222 2016 2/12/2016 5 to 40 years PA 1,768 3,879 78 1,768 3,957 5,725 98 1970 2/17/2016 5 to 40 years CO 4,528 7,915 85 4,528 8,000 12,528 175 2011 2/29/2016 5 to 40 years CA 17,976 25,145 372 17,976 25,517 43,493 491 2005 3/16/2016 5 to 40 years CA 0 6,318 211 0 6,529 6,529 264 1985 3/16/2016 5 to 40 years CA 4,671 13,908 80 4,671 13,988 18,659 269 2015 3/16/2016 5 to 40 years CA 6,728 10,340 186 6,728 10,526 17,254 210 2005 3/17/2016 5 to 40 years CA 17,445 18,839 402 17,445 19,241 36,686 370 2003 4/11/2016 5 to 40 years CT 3,618 5,286 181 3,618 5,467 9,085 104 2000 4/14/2016 5 to 40 years CT 2,524 5,618 74 2,524 5,692 8,216 109 2001 4/14/2016 5 to 40 years NY 4,207 2,373 5,089 161 2,373 5,250 7,623 87 1991/1944 4/26/2016 5 to 40 years NY 3,337 13,112 75 3,337 13,187 16,524 226 2013 4/26/2016 5 to 40 years FL 4,002 4,140 7,176 232 4,140 7,408 11,548 161 2002 5/2/2016 5 to 40 years TX 2,333 8,302 122 2,333 8,424 10,757 149 2007 5/5/2016 5 to 40 years NY 499 5,198 106 499 5,304 5,803 80 2006 5/19/2016 5 to 40 years NY 215 2,323 240 215 2,563 2,778 38 2006 5/19/2016 5 to 40 years TX 1,030 8,163 83 1,030 8,246 9,276 106 1984 7/15/2016 5 to 40 years TX 1,210 14,833 53 1,210 14,886 16,096 189 2003 7/15/2016 5 to 40 years TX 930 12,269 46 930 12,315 13,245 159 1999 7/15/2016 5 to 40 years TX 3,070 20,782 111 3,070 20,893 23,963 282 2005 7/15/2016 5 to 40 years TX 830 6,129 44 830 6,173 7,003 80 1986 7/15/2016 5 to 40 years TX 1,530 10,647 54 1,530 10,701 12,231 145 2001/2015 7/15/2016 5 to 40 years TX 750 9,238 49 750 9,287 10,037 120 2005 7/15/2016 5 to 40 years IL 1,430 14,958 26 1,430 14,984 16,414 193 2006 7/15/2016 5 to 40 years IL 350 4,710 14 350 4,724 5,074 61 2004 7/15/2016 5 to 40 years IL 2,770 25,112 85 2,770 25,197 27,967 319 2007 7/15/2016 5 to 40 years IL 1,190 19,159 40 1,190 19,199 20,389 241 2009 7/15/2016 5 to 40 years IL 1,720 10,628 58 1,720 10,686 12,406 134 2007 7/15/2016 5 to 40 years IL 3,670 26,660 126 3,670 26,786 30,456 338 2009 7/15/2016 5 to 40 years IL 1,090 20,033 49 1,090 20,082 21,172 257 2009 7/15/2016 5 to 40 years IL 1,610 14,914 40 1,610 14,954 16,564 189 2009 7/15/2016 5 to 40 years IL 3,770 19,990 74 3,770 20,064 23,834 262 2008 7/15/2016 5 to 40 years IL 1,340 11,881 33 1,340 11,914 13,254 153 2008 7/15/2016 5 to 40 years IL 1,670 10,811 24 1,670 10,835 12,505 136 2010 7/15/2016 5 to 40 years IL 670 18,729 20 670 18,749 19,419 236 2008 7/15/2016 5 to 40 years IL 1,130 12,584 71 1,130 12,655 13,785 162 2003 7/15/2016 5 to 40 years IL 5,600 12,721 24 5,600 12,745 18,345 162 2006 7/15/2016 5 to 40 years
Description San Antonio Portland Brunswick Chicago - St. Charles Chicago - Ashland San Antonio - Walzem St. Louis - Woodson St. Louis - Mexico St. Louis - Vogel St. Louis - Pershall St. Louis - Manchester St. Louis - North Highway St. Louis - Dunn Trenton Fishkill Atlanta - Peachtree Paterson Asbury Park - 1st Ave Farmingdale - Tinton Falls Lakewood - Route 70 Matawan St. Petersburg - Gandy Chesapeake - Campostella San Antonio-Castle Hills Chattanooga - Broad St New Orleans - Kenner Orlando - Celebration Austin - Cedar Park Chicago - Pulaski Houston - Gessner Construction in Progress Corporate Office Description Chicago - Matteson Chicago - S. Heights Chicago - W. Grand Chicago - W 30th St Chicago - Mokena Chicago - Barrington Chicago - Naperville Chicago - Forest Park Chicago - La Grange Chicago - Glenview Dallas - Richardson Dallas - Arlington Dallas - Plano Dallas - Mesquite Dallas - S Good Latimer Boulder - Arapahoe Boulder - Odell Boulder - Arapahoe Boulder - Broadway Houston - Westpark Houston - C. Jester Houston - Bay Pointe Houston - FM 529 Houston - Jones Jackson - Flowood Las Vegas - Spencer Las Vegas - Maule Las Vegas - Wigwam Las Vegas - Stufflebeam Las Vegas - Ft. Apache Las Vegas - North Las Vegas - Warm Springs Las Vegas - Conestoga Las Vegas - Warm Springs Las Vegas - Nellis Las Vegas - Cheyenne Las Vegas - Dean Martin Las Vegas - Flamingo Las Vegas - North Las Vegas - Henderson Las Vegas - North Las Vegas - Farm Los Angeles - Torrance Los Angeles - Irvine Los Angeles - Palm Desert Milwaukee - Green Bay Orlando - Winter Garden Orlando - Longwood Orlando - Overland Sacramento - Calvine Sacramento - Folsom Sacramento - Pell Sacramento - Goldenland Sacramento - Woodland Sacramento - El Camino Sacramento - Bayou Sacramento - Calvine Sacramento - El Dorado Sacramento - Fruitridge Salt Lake City - W. Jordan San Antonio - US 281 Austin - San Marcos Charleston Initial Cost to Company Cost Capitalized
Subsequent to
Acquisition Gross Amount at Which
Carried at Close of Period ST Encum
brance Land Building,
Equipment
and
Impvmts Building,
Equipment
and
Impvmts Land Building,
Equipment
and
Impvmts Total Accum.
Deprec. Date of
Const. Date
Acquired Life on
which depr
in latest
income
statement
is computed TX 2,235 6,269 317 2,235 6,586 8,821 162 2012 2/10/2014 5 to 40 years ME 2,146 6,418 163 2,146 6,581 8,727 156 2000 2/11/2014 5 to 40 years ME 493 5,234 66 493 5,300 5,793 124 2006 2/11/2014 5 to 40 years IL 1,837 6,301 499 1,837 6,800 8,637 136 2004/2013 3/31/2014 5 to 40 years IL 598 4,789 127 598 4,916 5,514 89 2014 5/5/2014 5 to 40 years TX 2,000 3,749 411 2,000 4,160 6,160 82 1997 5/13/2014 5 to 40 years MO 2,444 5,966 309 2,444 6,275 8,719 95 1998 5/22/2014 5 to 40 years MO 638 3,518 269 638 3,787 4,425 59 1998 5/22/2014 5 to 40 years MO 2,010 3,544 176 2,010 3,720 5,730 58 2000 5/22/2014 5 to 40 years MO 292 325 81 292 406 698 8 1979 5/22/2014 5 to 40 years MO 508 2,042 320 508 2,362 2,870 35 1996 5/22/2014 5 to 40 years MO 1,989 4,045 286 1,989 4,331 6,320 68 1997 5/22/2014 5 to 40 years MO 1,538 4,510 271 1,538 4,781 6,319 74 2000 5/22/2014 5 to 40 years NJ 5,161 7,063 289 5,161 7,352 12,513 120 1980 6/5/2014 5 to 40 years NY 1,741 6,006 104 1,741 6,110 7,851 96 2005 6/11/2014 5 to 40 years GA 2,263 4,931 391 2,263 5,322 7,585 91 2007 6/12/2014 5 to 40 years NJ 0 2,292 115 0 2,407 2,407 92 2000 6/12/2014 5 to 40 years NJ 819 4,734 121 819 4,855 5,674 63 2003 6/18/2014 5 to 40 years NJ 1,097 5,618 197 1,097 5,815 6,912 75 2004 6/18/2014 5 to 40 years NJ 626 4,549 135 626 4,684 5,310 60 2003 6/18/2014 5 to 40 years NJ 1,512 9,707 235 1,512 9,942 11,454 127 2005 7/10/2014 5 to 40 years FL 2,958 6,904 170 2,958 7,074 10,032 61 2007 8/28/2014 5 to 40 years VA 2,349 3,875 98 2,349 3,973 6,322 37 2000 9/5/2014 5 to 40 years TX 2,658 8,190 219 2,658 8,409 11,067 71 2002 9/10/2014 5 to 40 years TN 759 5,608 173 759 5,781 6,540 38 2014 9/18/2014 5 to 40 years LA 5,771 10,375 346 5,771 10,721 16,492 70 2008 10/10/2014 5 to 40 years FL 6,091 4,641 335 6,091 4,976 11,067 22 2006 10/21/2014 5 to 40 years TX 4,196 8,374 349 4,196 8,723 12,919 38 2003 10/28/2014 5 to 40 years IL 889 4,700 301 889 5,001 5,890 21 2014 11/14/2014 5 to 40 years TX 1,599 5,813 385 1,599 6,198 7,797 0 2006 12/18/2014 5 to 40 years 0 0 4,761 0 4,761 4,761 0 2013 NY 0 68 24,783 1,633 23,218 24,851 13,468 2000 5/1/2000 5 to 40 years $ 2,127 $ 385,294 $ 1,383,414 $ 409,275 $ 397,642 $ 1,780,341 $ 2,177,983 $ 411,701 Initial Cost to Company Cost
Capitalized
Subsequent
to
Acquisition Gross Amount at Which
Carried at Close of Period Life on
which
depreciation Encum Building,
Equipment
and Building,
Equipment
and Building,
Equipment
and Accum. Date of Date in latest
income
statement ST brance Land Impvmts. Impvmts. Land Impvmts. Total Deprec. Const. Acquired is completed IL 1,590 12,053 32 1,590 12,085 13,675 161 2007 7/15/2016 5 to 40 years IL 1,050 4,960 45 1,050 5,005 6,055 68 2006 7/15/2016 5 to 40 years IL 1,780 8,928 80 1,780 9,008 10,788 113 2007 7/15/2016 5 to 40 years IL 600 15,574 47 600 15,621 16,221 197 2008 7/15/2016 5 to 40 years IL 3,230 18,623 195 3,230 18,818 22,048 243 2008 7/15/2016 5 to 40 years IL 1,890 9,395 65 1,890 9,460 11,350 123 2015 7/15/2016 5 to 40 years IL 2,620 11,933 62 2,620 11,995 14,615 160 2015 7/15/2016 5 to 40 years IL 1,100 10,087 35 1,100 10,122 11,222 130 2015 7/15/2016 5 to 40 years IL 960 13,019 28 960 13,047 14,007 167 2015 7/15/2016 5 to 40 years IL 3,210 8,519 35 3,210 8,554 11,764 114 2014/2015 7/15/2016 5 to 40 years TX 630 10,282 43 630 10,325 10,955 136 2001 7/15/2016 5 to 40 years TX 790 12,785 44 790 12,829 13,619 164 2007 7/15/2016 5 to 40 years TX 1,370 10,166 34 1,370 10,200 11,570 130 1998 7/15/2016 5 to 40 years TX 620 8,771 32 620 8,803 9,423 113 2016 7/15/2016 5 to 40 years TX 4,030 8,029 64 4,030 8,093 12,123 104 2016 7/15/2016 5 to 40 years CO 3,690 12,074 28 3,690 12,102 15,792 158 1992 7/15/2016 5 to 40 years CO 2,650 15,304 30 2,650 15,334 17,984 201 1998 7/15/2016 5 to 40 years CO 11,540 15,571 34 11,540 15,605 27,145 204 1984 7/15/2016 5 to 40 years CO 2,670 5,623 42 2,670 5,665 8,335 75 1992 7/15/2016 5 to 40 years TX 2,760 8,288 96 2,760 8,384 11,144 110 1996 7/15/2016 5 to 40 years TX 8,080 10,114 96 8,080 10,210 18,290 132 2008 7/15/2016 5 to 40 years TX 1,960 9,585 65 1,960 9,650 11,610 125 1972 7/15/2016 5 to 40 years TX 680 3,951 48 680 3,999 4,679 53 2005 7/15/2016 5 to 40 years TX 1,260 2,382 44 1,260 2,426 3,686 35 1994 7/15/2016 5 to 40 years MS 680 20,066 36 680 20,102 20,782 260 2000 7/15/2016 5 to 40 years NV 1,020 25,152 16 1,020 25,168 26,188 320 2000 7/15/2016 5 to 40 years NV 2,510 11,822 15 2,510 11,837 14,347 151 2005 7/15/2016 5 to 40 years NV 590 16,838 3 590 16,841 17,431 212 2008 7/15/2016 5 to 40 years NV 350 6,977 86 350 7,063 7,413 91 1996 7/15/2016 5 to 40 years NV 1,470 11,047 15 1,470 11,062 12,532 144 2004 7/15/2016 5 to 40 years NV 390 7,042 20 390 7,062 7,452 91 2005 7/15/2016 5 to 40 years NV 1,340 5,141 51 1,340 5,192 6,532 83 2004 7/15/2016 5 to 40 years NV 1,420 10,295 21 1,420 10,316 11,736 138 2007 7/15/2016 5 to 40 years NV 1,080 16,436 15 1,080 16,451 17,531 209 2007 7/15/2016 5 to 40 years NV 790 5,233 7 790 5,240 6,030 73 1995 7/15/2016 5 to 40 years NV 1,470 17,366 17 1,470 17,383 18,853 231 2004 7/15/2016 5 to 40 years NV 3,050 23,333 6 3,050 23,339 26,389 327 2005 7/15/2016 5 to 40 years NV 980 13,451 23 980 13,474 14,454 171 2007 7/15/2016 5 to 40 years NV 330 15,651 19 330 15,670 16,000 199 2007 7/15/2016 5 to 40 years NV 570 12,676 37 570 12,713 13,283 167 2005 7/15/2016 5 to 40 years NV 520 10,105 6 520 10,111 10,631 132 2002 7/15/2016 5 to 40 years NV 1,510 9,388 13 1,510 9,401 10,911 121 2008 7/15/2016 5 to 40 years CA 5,250 32,363 61 5,250 32,424 37,674 412 2004 7/15/2016 5 to 40 years CA 2,520 18,402 134 2,520 18,536 21,056 234 2002 7/15/2016 5 to 40 years CA 2,660 16,589 69 2,660 16,658 19,318 216 2002 7/15/2016 5 to 40 years WI 750 14,720 3 750 14,723 15,473 189 2005 7/15/2016 5 to 40 years FL 640 6,688 38 640 6,726 7,366 87 2006 7/15/2016 5 to 40 years FL 1,230 9,586 27 1,230 9,613 10,843 123 2000 7/15/2016 5 to 40 years FL 1,080 3,713 29 1,080 3,742 4,822 49 2000 7/15/2016 5 to 40 years CA 2,280 17,069 20 2,280 17,089 19,369 220 2004 7/15/2016 5 to 40 years CA 1,200 22,150 16 1,200 22,166 23,366 279 2005 7/15/2016 5 to 40 years CA 540 8,874 12 540 8,886 9,426 115 2004 7/15/2016 5 to 40 years CA 2,010 8,944 10 2,010 8,954 10,964 122 2005 7/15/2016 5 to 40 years CA 860 10,569 18 860 10,587 11,447 135 2003 7/15/2016 5 to 40 years CA 1,450 12,239 7 1,450 12,246 13,696 158 2002 7/15/2016 5 to 40 years CA 1,640 21,603 10 1,640 21,613 23,253 277 2005 7/15/2016 5 to 40 years CA 2,120 24,650 7 2,120 24,657 26,777 318 2003 7/15/2016 5 to 40 years CA 1,610 24,829 13 1,610 24,842 26,452 319 2007 7/15/2016 5 to 40 years CA 1,480 15,695 126 1,480 15,821 17,301 207 2007 7/15/2016 5 to 40 years UT 780 12,301 -88 780 12,213 12,993 154 2007 7/15/2016 5 to 40 years TX 1,380 8,457 57 1,380 8,514 9,894 108 2003 7/15/2016 5 to 40 years TX 990 7,323 48 990 7,371 8,361 96 2016 7/15/2016 5 to 40 years SC 920 7,700 25 920 7,725 8,645 87 2016 7/29/2016 5 to 40 years
Cost: Balance at beginning of period Additions during period: Acquisitions through foreclosure Other acquisitions Improvements, etc Deductions during period: Cost of assets disposed Impairment write-down Casualty loss Balance at close of period Accumulated Depreciation: Balance at beginning of period Additions during period: Depreciation expense Deductions during period: Accumulated depreciation of assets disposed Accumulated depreciation on impaired asset Accumulated depreciation on casualty loss Balance at close of period Description Denver - Westminster Chicago - Arlington Hgts Orlando - Curry Ford Construction in Progress Corporate Office December 31, 2014 December 31, 2013 December 31, 2012 $ 1,864,637 $ 1,742,354 $ 1,525,283 $ — $ — $ — 286,691 93,376 185,431 35,097 33,811 36,238 321,788 127,187 221,669 (8,442 ) (4,904 ) (4,598 ) — — — — — — (8,442 ) (4,904 ) (4,598 ) $ 2,177,983 $ 1,864,637 $ 1,742,354 $ 366,472 $ 324,963 $ 289,082 $ 47,656 $ 41,929 $ 37,226 47,656 41,929 37,226 (2,427 ) (420 ) (1,345 ) — — — — — — (2,427 ) (420 ) (1,345 ) $ 411,701 $ 366,472 $ 324,963 Initial Cost to Company Cost
Capitalized
Subsequent
to
Acquisition Gross Amount at Which
Carried at Close of Period Life on
which
depreciation Encum Building,
Equipment
and Building,
Equipment
and Building,
Equipment
and Accum. Date of Date in latest
income
statement ST brance Land Impvmts. Impvmts. Land Impvmts. Total Deprec. Const. Acquired is completed CO 5,062 3,679 172 5,062 3,851 8,913 40 2000 8/4/2016 5 to 40 years IL 370 8,513 3 370 8,516 8,886 18 2016 11/17/2016 5 to 40 years FL 2,966 3,268 6,378 23 3,268 6,401 9,669 13 2016 12/20/2016 5 to 40 years 0 0 14,524 0 14,524 14,524 0 2015 NY 0 68 33,969 1,633 32,404 34,037 17,651 2000 5/1/2000 5 to 40 years $ 13,027 $ 772,601 $ 2,965,619 $ 505,088 $ 786,764 $ 3,456,544 $ 4,243,308 $ 535,704
(dollars in thousands)
December 31, 2016 | December 31, 2015 | December 31, 2014 | ||||||||||
Cost: | ||||||||||||
Balance at beginning of period | $ | 2,491,702 | $ | 2,177,983 | $ | 1,864,637 | ||||||
Additions during period: | ||||||||||||
Acquisitions through foreclosure | — | — | — | |||||||||
Other acquisitions | 1,714,029 | 278,572 | 286,691 | |||||||||
Improvements, etc. | 73,385 | 42,046 | 35,097 | |||||||||
|
|
|
|
|
| |||||||
1,787,414 | 320,618 | 321,788 | ||||||||||
Deductions during period: | ||||||||||||
Cost of assets disposed | (35,808 | ) | (6,899 | ) | (8,442 | ) | ||||||
Impairment write-down | — | — | — | |||||||||
Casualty loss | — | — | — | |||||||||
|
|
|
|
|
| |||||||
(35,808 | ) | (6,899 | ) | (8,442 | ) | |||||||
|
|
|
|
|
| |||||||
Balance at close of period | $ | 4,243,308 | $ | 2,491,702 | $ | 2,177,983 | ||||||
|
|
|
|
|
| |||||||
Accumulated Depreciation: | ||||||||||||
Balance at beginning of period | $ | 465,195 | $ | 411,701 | $ | 366,472 | ||||||
Additions during period: | ||||||||||||
Depreciation expense | 87,219 | 55,101 | 47,656 | |||||||||
|
|
|
|
|
| |||||||
87,219 | 55,101 | 47,656 | ||||||||||
Deductions during period: | ||||||||||||
Accumulated depreciation of assets disposed | (16,710 | ) | (1,607 | ) | (2,427 | ) | ||||||
Accumulated depreciation on impaired asset | — | — | — | |||||||||
Accumulated depreciation on casualty loss | — | — | — | |||||||||
(16,710 | ) | (1,607 | ) | (2,427 | ) | |||||||
|
|
|
|
|
| |||||||
Balance at close of period | $ | 535,704 | $ | 465,195 | $ | 411,701 | ||||||
|
|
|
|
|
|
The aggregate cost of real estate for U.S. federal income tax purposes is $4,326,173.
84103