Dear Fellow Shareholders:
We concluded last year's shareholder letter with the statement "We've done a lot of growing in the
past 30 years, and we' re well positioned to do a lot more".
Indeed we were. 2016 was by far the most acquisitive year we've ever had. We purchased 122
self-storage facilities, increasing our wholly owned portfolio by 25%, and the number of our rental units by
30%. The various transactions allowed us to add some 80 stores to our existing core markets such as Chicago,
Dallas, Miami, Orlando and the NY City Metro area, and enabled us to enter three attractive new markets with
the scale we need to operate efficiently: Los Angeles (12 properties}, Sacramento (10) and Las Vegas (17).
The stores we acquired are of outstanding quality. These properties are what the industry terms "3rd
Generation" storage facilities. They're bigger; more aesthetically pleasing, and have amenities such as
climate control and enhanced security features that command premium rates. Operating bigger stores in
concentrated markets allows us the ability to more effectively manage our digital marketing costs and
management overhead. Our portfolio quality has been greatly enhanced by this year's purchases.
The properties did not come cheap; high quality stores in large growth markets never do. We do
however, see great opportunity in these facilities. Because none of the prior owners had the size or scale to
employ the technology we've developed, such as our full service, round-the-dock call center, our
sophisticated revenue management system or our state of the art internet advertising platform, we feel
confident that the financial performance of these acquisitions will improve considerably in the coming 18 to 24
months.
As has been our policy since we became a publicly traded company, we financed these acquisitions in
a timely, conservative manner. At the beginning of the year, we attained a long sought upgrade to our credit
rating, and a significant increase to our credit line capacity. Both of these enhancements were of great benefit
in acquiring, and then financing the new properties. We raised almost $1 billion of equity, and $800 million of
long term, fixed rate debt at attractive rates, including $600 million via our inaugural public debt offering.
Overall, our average interest rate declined by .75% (a substantial reduction when applied to $1.6 billion of
notes outstanding), our debt maturity tenure increased to over seven years, and our borrowing capacity grew
by $200 million.
In addition to integrating these properties to our platforms, and bringing 270 new employees into our
systems and our culture, we also undertook the exciting and transformational task of changing our name. For
over 30 years Sovran Self Storage, Inc. was our corporate label, and Uncle Bob's Self Storage was our trade
name. Besides clearing the confusion caused by the dual moniker, we enhanced and updated the image of
our product by introducing a more relevant brand name. Our customers see the spaces they rent from us as
an extension of their homes and businesses, where the environment is welcoming and their belongings are
secure. We've always operated under this ideal, but the name Life Storage now brings that principle into
sharper focus. For a great depiction of this, spend a couple minutes viewing one of our "The Things We
Keep Because" videos at lifestorage.com/because.
In 2016, our Company got bigger, better, and stronger. It's also reenergized with a great new brand.
This is important, as after five tremendous years of revenue, occupancy and income increases, the self-storage
sector is experiencing some moderation to its rate of growth. Due partly to the impact of new supply
entering the industry, and partly to a bit of "cooling off" after a sustained run of outsized performance, this
moderation is nothing we haven't seen during our many years in the business. As we enter another one of the
"competitive" phases of our industry's recurring cycle, the added size, strength and presence we attained last
year will serve us well.
We appreciate your continued confidence in us.
Robert J. Attea
Executive Chairman
Kenneth F. Myszka
President
David Rogers
Chief Executive Officer
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, 2016
Commission File Number:
1-13820 (Life Storage, Inc.)
0-24071 (Life Storage LP)
LIFE STORAGE, INC.
LIFE STORAGE LP
(Exact name of Registrant as specified in its charter)
Maryland (Life Storage, Inc.)
Delaware (Life Storage LP)
(State of incorporation or organization)
16-1194043 (Life Storage, Inc.)
16-1481551 (Life Storage LP)
(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)
Title of Securities
Common Stock, $.01 Par Value
Exchanges on which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(b) of the Act:
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.
Life Storage, Inc.
Life Storage LP
Yes [ X ] No [ ]
Yes [ X ] 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.
Life Storage, Inc.
Life Storage LP
Yes [
Yes [
] No [ X ]
] No [ X ]
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.
Life Storage, Inc.
Life Storage LP
Yes [ X ] No [ ]
Yes [ X ] 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).
Life Storage, Inc.
Life Storage LP
Yes [ X ] No [ ]
Yes [ X ] 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.
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.:
Life Storage LP:
Large accelerated filer [ X ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ]
Large accelerated filer [ X ] 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).
Life Storage, Inc.
Life Storage LP
Yes [ ] No [ X ]
Yes [ ] No [ X ]
As of June 30, 2016, 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 $4,779,975,682 (based on the closing price of the
Common Stock on the New York Stock Exchange on June 30, 2016). As of February 13, 2017, 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 2017 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 registrants’ fiscal year ended December 31, 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:
•
•
•
facilitate a better understanding by the investors of the Parent Company and the Operating Partnership by
enabling them to view the business as a whole in the same manner as management views and operates the
business;
remove duplicative disclosures and provide a more straightforward presentation in light of the fact that a
substantial portion of the disclosure applies to both the Parent Company and the Operating Partnership; and
create time and cost efficiencies through the preparation of one combined report instead of two separate reports.
2
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.
3
TABLE OF CONTENTS
Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Part IV
Item 15. Exhibits, Financial Statement Schedules
Item 16. Form 10-K Summary
SIGNATURES
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
5
12
19
20
21
21
22
24
27
42
43
81
81
85
85
85
85
85
85
85
91
92
4
Part I
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
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”.
Also, consistent with these name changes, and in 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 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 changing demographics and consumer trends in the self-storage industry. We believe that the change to the
“Life Storage®” 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®” name.
The Company is a self-administered and self-managed real estate 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, 2016, we had an ownership interest
in and/or managed 659 self-storage properties in 29 states under the names Life Storage® and Uncle Bob's Self Storage®.
Among our 659 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, and 26 properties that we manage and have no
ownership interest. 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 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. All of our Properties will
conduct business under the customer-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® 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, 2016, the Parent Company owned an indirect interest in 633 of the Properties through the
Operating Partnership, which excludes the 26 properties that we manage and have no ownership interest. Included in the 633
properties are the 69 facilities in our unconsolidated joint ventures. 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,
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.
5
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 websites are www.lifestorage.com and www.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 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 2017 Self-Storage Almanac, of the estimated 51,000 facilities in the United States (including both
core and non-core storage businesses), approximately 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, 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 31 years of experience managing self-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 name Uncle Bob's 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. 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.
6
All learning and development activities are facilitated through our online training and development 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. Life 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:
• We employ a Customer Care Center (call center) that services an average of 40,000 rental inquiries per month.
Our Sales Representatives answer incoming sales calls for all of our stores, 361 days a year, 24 hours a day. The
team undertakes continuous training and coaching in effective storage sales techniques, which we believe results
in higher conversions of inquiries to rentals.
• The digital age has changed consumer behavior - the way people shop, their expectations, and the way we
communicate with them. Our aggressive internet marketing and website provide customers with real-time pricing,
online reservations, online payments, and support for mobile devices. We involve internal and external expertise
to manage our internet presence and leverage a mix of mobile, desktop, and social media to attract and engage
customers.
• Since the need for storage is largely based on timing, the ultimate goal is to create as much positive brand
recognition as possible. When the time comes for a customer to select a storage company, we want the Life
Storage brand to be on the top of their mind. We employ a variety of different strategies to create brand
awareness; this includes our Life Storage rental trucks, branded merchandise such as moving and packing supplies,
and extensive regional marketing in the communities in which we operate. We strive to gain the most exposure as
possible for the longest period of time.
• Approximately 45% of our self-storage space is comprised of units with temperature and/or humidity control
capabilities which we market to corporate customers and retail customers seeking storage solutions for valuable,
sentimental, or otherwise sensitive items.
• We also have a fleet of rental trucks that serve as an added incentive to choose our storage facilities. The truck
rental charge is waived for new move-in customers and we believe it provides a valuable service and added
incentive to choose us. Further, the prominent display of our logo turns each truck into a moving billboard.
Ancillary Income:
We know that our 360,000 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 Life 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 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:
•
• Our proprietary operating software (“ubOS”) is installed at all locations and performs the functions necessary for
field personnel to efficiently and effectively run a property. This includes customer account management, automatic
imposition of late fees, move-in and move-out analysis, generation of essential legal notices, and marketing reports
to aid in regional marketing efforts. Financial reports are automatically transmitted to our Corporate Offices
overnight to allow for strict accounting oversight.
ubOS is linked with each of our primary sales channels (customer care center, internet, store) allowing for real-time
access to space type and inventory, pricing, promotions, and other pertinent store information. This robust flow of
information facilitates our commitment to capturing prospective customers from all channels.
ubOS provides our revenue management team with raw data on historical pricing, move-in and move-out activity,
specials and occupancies, etc. This data is utilized in the various algorithms that form the foundation of our revenue
management program. Changes to pricing and specials are “pushed out” to all sales channels instantaneously.
•
7
•
ubOS generates financial reports for each property that provide our accounting and audit departments with the
necessary oversight of transactions; this allows us to maintain proper control of receipts.
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 revenue 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, LED lighting, energy efficient air conditioning units, and cool roofs which are all 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 operating
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 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."
8
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.
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
In order to maintain our qualification as a REIT, we must make annual
as the Board of Directors deems relevant.
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
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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 $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, 2016 the margin was 1.10%). 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 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 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 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”) at a weighted average issue price of $96.80 per share, generating net proceeds of $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 approximately $99.2 million. During 2016, the Company did not issue any shares of common
stock under the Equity Program. As of December 31, 2016, the Company has $59.3 million availability for issuance of
shares under the Equity 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 - Liquidity and Capital Resources"
and Note 6 to the Consolidated Financial Statements filed herewith.
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Employees
We currently employ a total of 1,537 employees, including 659 property managers, 45 area managers, and 581
associate managers and part-time employees. At our headquarters, in addition to our six senior executive officers, we employ
246 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 at
http://www.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 at http://www.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 Life Storage, Inc., Attn: Investor Relations, 6467
Main Street, Williamsville, NY 14221.
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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 Senior Notes. We have a line of credit and term note agreements with a
syndicate of financial institutions and other lenders, along with senior debt of $600 million. This indebtedness is recourse to
us and the required payments are not reduced if the economic performance of any of the properties declines. The facilities
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 indebtedness 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 loan 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 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 receive a reduction in our credit rating from
the agencies, the interest rate on our line of credit would increase by up to 0.50% and the interest rate on $325 million of our
bank term notes would increase by up to 0.65%. Should we fail to attain an investment grade rating from the agencies, the
interest rates on our $100 million term note due 2021 and our $175 million term note due 2024 would each increase by
1.750%.
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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 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:
• Decreases in demand for rental spaces in a particular locale;
• Changes in supply of similar or competing self-storage facilities in an area;
• Changes in market rental rates; and
•
Inability to collect rents from customers.
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:
• Changes in national economic conditions;
• Changes in general or local economic conditions and neighborhood characteristics;
• Competition from other self-storage facilities;
• Changes in interest rates and in the availability, cost and terms of financing;
• The impact of present or future environmental legislation and compliance with environmental laws;
• The ongoing need for capital improvements, particularly in older facilities;
• Changes in real estate tax rates and other operating expenses;
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•
Adverse changes in governmental rules and fiscal policies;
•
Uninsured losses resulting from casualties associated with civil unrest, acts of God, including natural disasters, and acts
of war;
•
Adverse changes in zoning laws; and
•
Other factors that are beyond our control.
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 the 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:
•
Have the effect of precluding an acquisition of control of the Company by a third party without consent of our Board of
Directors even if the change in control would be in the interest of shareholders; and
•
Limit the opportunity for shareholders to receive a premium for shares of our common stock they hold that might
otherwise exist if an investor were attempting to assemble a block of common stock in excess of 9.8% or 15%, as the
case may be, of the outstanding shares of our stock or to otherwise effect a change in control of Life Storage.
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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 the
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 Life 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.
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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.
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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 the 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, the Operating Partnership is not subject to federal income tax on its income. Instead, each of the partners is
allocated its share of the Operating Partnership’s income. No assurance can be provided, however, that the IRS will not
challenge the 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 the 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 2016, our Board of Directors authorized and we declared quarterly common stock dividends of $0.85 per share in
January, and $0.95 per share for April, July and October, for a total 2016 dividend per share annual rate of $3.70 per share.
In addition, our board of directors authorized and we declared a quarterly common stock dividend of $0.95 per share in
January 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 Board of Directors 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.
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Regional Concentration of Our Business May Subject Us to Economic Downturns in the States of Texas and Florida
As of December 31, 2016, 244 of our 659 self-storage facilities are located in the states of Texas and Florida. For
the year ended December 31, 2016, these facilities accounted for approximately 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
18
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.
19
Item 2.
Properties
At December 31, 2016, we held ownership interests in, leased, and/or managed a total of 659 Properties situated in
twenty-nine states. Among our 659 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, and 26 properties that we manage and have no ownership interest. 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
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 195,000 net rentable square feet, with an
average of approximately 70,000 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 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 name Uncle Bob's
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, 2016:
Alabama....................................................................
Arizona .....................................................................
California ..................................................................
Colorado ...................................................................
Connecticut ...............................................................
Florida.......................................................................
Georgia .....................................................................
Illinois.......................................................................
Kentucky...................................................................
Louisiana...................................................................
Maine........................................................................
Maryland...................................................................
Massachusetts ...........................................................
Mississippi ................................................................
Missouri ....................................................................
Nevada ......................................................................
New Hampshire ........................................................
New Jersey................................................................
New York..................................................................
North Carolina ..........................................................
Ohio ..........................................................................
Pennsylvania .............................................................
Rhode Island .............................................................
South Carolina ..........................................................
Tennessee..................................................................
Texas.........................................................................
Utah ..........................................................................
Virginia.....................................................................
Wisconsin .................................................................
Total........................................................................
Number of
Stores at
December 31,
2016
21
12
22
11
10
87
30
45
2
16
4
3
15
12
14
17
10
29
44
21
24
11
4
13
5
157
1
17
2
659
Square
Feet
1,581,803
798,474
2,040,278
776,794
754,348
5,933,877
2,091,516
3,352,221
142,914
974,384
219,967
138,639
824,090
883,656
912,735
1,303,192
725,777
2,089,217
2,651,089
1,272,271
1,630,497
692,196
206,721
853,791
348,504
11,495,842
86,000
1,265,058
121,442
46,167,293
Number of
Spaces
12,152
7,077
17,981
6,826
7,539
57,474
17,870
33,972
1,322
8,296
2,179
1,618
8,296
6,606
8,206
11,169
6,226
21,867
25,451
11,572
13,691
5,984
1,924
7,533
3,005
95,000
575
11,535
1,138
414,084
Percentage
of Store
Revenue
2.7%
1.6%
3.7%
1.6%
2.4%
13.7%
4.5%
6.1%
0.3%
2.0%
0.7%
0.4%
2.3%
1.6%
2.1%
1.3%
1.5%
6.6%
7.4%
2.5%
3.0%
1.5%
0.6%
1.9%
0.8%
24.7%
0.1%
2.3%
0.1%
100.0%
20
At December 31, 2016, the Properties had an average occupancy of 87.76% and an annualized rent per occupied
square foot of $13.86.
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
21
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Our Common Stock was traded on the New York Stock Exchange under the symbol “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 2015
1st ..............................................................................
2nd .............................................................................
3rd..............................................................................
4th ..............................................................................
Quarter 2016
1st ..............................................................................
2nd .............................................................................
3rd..............................................................................
4th ..............................................................................
High
$97.76
94.84
99.32
110.60
High
$118.18
$117.81
$107.71
$88.89
Low
$87.40
85.95
85.69
93.33
Low
$98.80
$98.93
$86.45
$77.00
As of February 13, 2017, there were approximately 662 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 2016 represent 95% ordinary income and 5% return of
capital.
History of Dividends Declared on Common Stock
January 2015..............................................................
April 2015..................................................................
July 2015....................................................................
October 2015 .............................................................
$0.750 per share
$0.750 per share
$0.850 per share
$0.850 per share
January 2016..............................................................
April 2016..................................................................
July 2016....................................................................
October 2016 .............................................................
$0.850 per share
$0.950 per share
$0.950 per share
$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 $9.5 million to pay part of the
consideration to acquire certain self-storage properties. The issuance of OP Units in connection with these acquisitions were
exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, because it did not involve any public
offering.
22
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information as of December 31, 2016, with respect to equity compensation
plans under which shares of the Company’s Common Stock may be issued.
Plan Category
Equity compensation plans approved by
shareholders:
2005 Award and Option Plan.............................
2015 Award and Option Plan (2) .......................
2009 Outside Directors' Stock Option and
Award Plan .....................................................
Deferred Compensation Plan for Directors (1) ..
Equity compensation plans not approved by
shareholders:...................................................
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights (#)
Weighted average
exercise price of
outstanding
options, warrants
and rights ($)
Number of
securities
remaining available
for future issuance
(#)
77,206
79,620
18,500
20,513
N/A
$45.49
-
$
$79.58
N/A
N/A
-
435,570
71,016
23,625
N/A
(1)
(2)
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.
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.
23
CORPORATE PERFORMANCE GRAPH
The following chart and line-graph presentation compares (i) the Company’s shareholder return on an indexed basis
since December 31, 2011 with (ii) the S&P Stock Index and (iii) the National Association of Real Estate Investment Trusts
Equity Index.
350
320
290
260
230
200
170
140
110
80
Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2013 Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2016
S&P 500
NAREIT
LSI
CUMULATIVE TOTAL SHAREHOLDER RETURN
LIFE STORAGE, INC.
DECEMBER 31, 2011 - DECEMBER 31, 2016
S&P
NAREIT
LSI
Dec. 31,
2011
Dec. 31,
2012
Dec. 31,
2013
Dec. 31,
2014
Dec. 31,
2015
Dec. 31,
2016
100.00
100.00
100.00
116.00
118.06
150.49
153.57
120.97
162.72
174.60
157.43
226.02
177.01
162.46
287.95
198.18
176.30
237.27
The foregoing item assumes $100.00 invested on December 31, 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.
24
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:
(dollars in thousands, except per
share data)
Operating Data
Operating revenues................................................
Income from continuing operations.......................
Income from discontinued operations (1)..............
Net income ............................................................
Net income attributable to common shareholders .
Income from continuing operations per common
share attributable to common shareholders –
diluted ................................................................
Net income per common share attributable to
common shareholders – basic ............................
Net income per common share attributable to
common shareholders – diluted ........................
Dividends declared per common share (2) ............
Balance Sheet Data
Investment in storage facilities at cost...................
Total assets ............................................................
Total debt ..............................................................
Total liabilities.......................................................
Other Data
Net cash provided by operating activities..............
Net cash used in investing activities......................
Net cash provided by (used in) financing activities
At or For Year Ended December 31,
2016
2015
2014
2013
2012
$ 462,608
84,956
-
84,956
85,225
$366,602
113,077
-
113,077
112,524
$ 326,080
89,057
-
89,057
88,531
$ 273,507
71,472
3,123
74,595
74,126
$ 234,082
48,121
7,520
55,641
55,128
1.96
1.97
1.96
3.70
3.16
3.18
3.16
3.20
2.67
2.26
2.68
2.67
2.72
2.37
2.36
2.02
1.61
1.88
1.87
1.80
$4,243,308
3,857,984
1,653,552
1,751,399
$2,491,702
2,118,822
827,643
898,336
$2,177,983
1,850,727
797,054
861,236
$1,864,637
1,558,894
623,273
675,245
$1,742,354
1,480,880
680,821
739,480
$225,550
(1,796,069)
1,587,184
$186,198
(328,689)
140,968
$146,068
(334,993)
187,944
$120,646
(114,345)
(4,032)
$98,762
(175,664)
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 dividends of $0.45 in January, April, July and October. In 2013 we declared
regular quarterly dividends of $0.48 in January and April, and $0.53 in July and October. In 2014 we declared
regular quarterly dividends of $0.68 in January, April, July and October. In 2015 we declared regular quarterly
dividends of $0.75 in January and April, and $0.85 in July and October. In 2016 we declared regular quarterly
dividends of $0.85 in January and $0.95 in April, July and October.
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.
25
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)
Operating Data
Operating revenues
Income from continuing operations.......................
Income from discontinued operations (1)..............
Net income ............................................................
Net income attributable to common unitholders ...
Income from continuing operations per common
unit attributable to common unitholders –
diluted ................................................................
Net income per common unit attributable to
common unitholders – basic..................................
Net income per common unit attributable to
common unitholders – diluted...........................
Distributions declared per common unit (2)..........
Balance Sheet Data
Investment in storage facilities at cost...................
Total assets ............................................................
Total debt ..............................................................
Total liabilities.......................................................
Other Data
Net cash provided by operating activities..............
Net cash used in investing activities......................
Net cash provided by (used in) financing activities
2016
2015
2014
2013
2012
$ 462,608
84,956
-
84,956
85,225
$366,602
113,077
-
113,077
112,524
$ 326,080
89,057
-
89,057
88,531
$ 273,507
71,472
3,123
74,595
74,126
$ 234,082
48,121
7,520
55,641
55,128
1.96
1.97
1.96
3.70
3.16
3.18
3.16
3.20
2.67
2.26
2.68
2.67
2.72
2.37
2.36
2.02
1.61
1.88
1.87
1.80
$4,243,308
3,857,984
1,653,552
1,751,399
$2,491,702
2,118,822
827,643
898,336
$2,177,983
1,850,727
797,054
861,236
$1,864,637
1,558,894
623,273
675,245
$1,742,354
1,480,880
680,821
739,480
$225,550
(1,796,069)
1,587,184
$186,198
(328,689)
140,968
$146,068
(334,993)
187,944
$120,646
(114,345)
(4,032)
$98,762
(175,664)
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.
26
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 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 name Uncle Bob's
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:
• We seek to differentiate our self-storage facilities from our competition through innovative marketing and
value-added product offerings including:
•
Our Customer Care Center, established in 2000, answers sales inquiries and makes reservations for all
of our Properties on a centralized basis. Further, our call center and customer contact software was
developed in-house and is 100% supported by our in-house experts;
Our truck move-in program, under which, at present, 362 of our stores offer a free Life Storage or
Uncle Bob’s truck to assist our customers moving into their spaces, and also serve as a moving
billboard further supporting our branding efforts;
Our dehumidification system, which provides our customers with a better environment to store their
goods and improves yields on our Properties;
Strategic and efficient Web and Mobile marketing that places Life Storage in front of customers in
search engines at the right time for conversion;
Regional marketing which creates effective brand awareness in the cities where we do business.
•
•
•
•
•
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.
27
•
All of our store employees receive a high level of training. New store associates are assigned a Certified
Training Manager as a mentor during their initial training period. In addition, all employees have access to
our online training and development portal for initial training as well as continuing education. Finally, we
have a company intranet that acts as a communications portal for company policy and procedures, online
ordering, incentive rankings, etc.
B.
Acquiring additional stores:
•
Our objective is to acquire new stores in markets in which we currently operate. This is a proven strategy we
have employed over the years as it facilitates our branding efforts, grows market share, and allows us to
achieve improved economies of scale through shared advertising, payroll, and other services.
• We also look to enter new markets that are in the top 50 Metropolitan Statistical Area (MSA) by acquiring
established multi-property portfolios. With this strategy we are then able to seek out additional acquisition or
third party management opportunities to continue to grow market share, branding and enhance economies of
scale.
C.
Expanding our management business:
• We see our management business as a source of future acquisitions. We hold a minority interest in two joint
ventures which hold a total of 69 properties that we manage and two additional joint ventures which acquired
a total of five properties in January 2017 that we have managed since acquisition. In addition, we manage 26
self-storage facilities for which we have no ownership. We may enter into additional management
agreements and develop additional joint ventures in the future.
D.
Expanding and enhancing our existing stores:
•
Over the past five years we have undertaken a program of expanding and enhancing our Properties. In 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; in 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; in 2014, we
added 272,000 square feet to existing Properties and converted 9,000 square feet to premium storage for a
total cost of approximately $18.3 million; in 2015, we added 256,000 square feet to existing Properties and
converted 5,000 square feet to premium storage for a total cost of approximately $14.1 million; and in 2016,
we added 343,000 square feet to existing Properties and converted 55,000 square feet to premium storage for
a total cost of approximately $22.4 million. From 2011 through 2016 we also installed solar panels on 29
buildings for a total cost of approximately $9.6 million. Our solar panel initiative has reduced energy
consumption and operating costs at those installed locations.
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 had resulted in a decrease in new supply on a national basis from 2010-2015, but the out-performance of the
sector 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) remain stable at approximately 4.50% to 5.50%.
28
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 2016 were lower than 2015 due to the fact that our stores had higher
occupancy in 2016, resulting in less space to rent. We believe the reduction in same store move-outs is a result of customers
renting with us for longer periods.
Same store move ins ............................................................
Same store move outs ..........................................................
Difference ............................................................................
2016
162,268
159,841
2,427
2015
166,843
162,948
3,895
Change
(4,575)
(3,107)
(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
through 2016. We expect same store expense growth resulting from increases in wages, health costs, property insurance and
property tax increases in 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. When 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 flows is less
than the carrying 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
29
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 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 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.
See Note 2 to the financial statements.
Recent Accounting Pronouncements
30
YEAR ENDED DECEMBER 31, 2016 COMPARED TO YEAR ENDED DECEMBER 31, 2015
We recorded rental revenues of $428.1 million for the year ended December 31, 2016, an increase of $89.7 million
or 26.5% when compared to 2015 rental revenues of $338.4 million. Of the increase in rental revenue, $16.1 million resulted
from a 5.0% increase in rental revenues at the 417 core properties considered in same store sales (those properties included in
the consolidated results of operations since January 1, 2015, excluding the properties we sold in 2016 and 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 50 basis point increase in average occupancy
and a 4.3% increase in rental income per square foot. The remaining increase in rental revenue of $73.6 million resulted
from the revenues 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 revenue decrease as a result of eight self-storage properties sold in 2016 and three self-storage properties sold in 2015.
Other operating income, which includes merchandise sales, insurance administrative fees, truck rentals, management fees and
acquisition fees, increased by $6.3 million for the year ended December 31, 2016 compared to 2015 primarily as a result of
increased administrative fees earned on customer insurance.
Property operations and maintenance expenses increased $21.4 million or 26.2% in 2016 compared to 2015. The
417 core properties considered in the same store pool experienced a $1.0 million or 1.3% increase in operating expenses as a
result of increases in payroll and internet 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 $20.4 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 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 $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 eight self-storage properties sold in 2016 and
three self-storage properties sold in 2015.
Our 2016 same store results consist of only those properties that were included in our consolidated results since
January 1, 2015, excluding the properties we sold in 2016 and 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.
31
The following table sets forth operating data for our 417 same store properties. These results provide information
relating to property operating changes without the effects of acquisition.
Same Store Summary
(dollars in thousands)
Year ended December 31,
2016
2015
Percentage
Change
Same store rental income ...................................................
Same store other operating income ....................................
Total same store operating income .................................
Payroll and benefits............................................................
Real estate taxes .................................................................
Utilities...............................................................................
Repairs and maintenance....................................................
Office and other operating expenses ..................................
Insurance ............................................................................
Advertising and yellow pages ............................................
Internet marketing ..............................................................
Total same store operating expenses...............................
Same store net operating income........................................
$ 339,773
18,693
358,466
29,754
36,707
11,217
13,516
11,703
4,035
1,114
6,409
114,455
$ 244,011
$ 323,664
17,085
340,749
28,843
34,847
11,789
13,412
11,373
4,414
1,352
5,557
111,587
$ 229,162
5.0%
9.4%
5.2%
3.2%
5.3%
(4.9%)
0.8%
2.9%
(8.6%)
(17.6%)
15.3%
2.6%
6.5%
Net operating income increased $63.2 million or 25.5% as a result of a 6.5% increase in our same store net operating
income and the acquisitions 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).
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 to 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.
32
The following table reconciles NOI generated by our self-storage facilities to our net income presented in the 2016
and 2015 consolidated financial statements.
(dollars in thousands)
Net operating income
Year ended December 31,
2016
2015
Same store...................................................................
Other stores and management fee income...................
Total net operating income.................................................
General and administrative.................................................
Acquisition related costs ....................................................
Write-off of acquired property deposits .............................
Operating leases of storage facilities..................................
Depreciation and amortization ...........................................
Interest expense..................................................................
Interest income ...................................................................
Gain (loss) on sale of storage facilities ..............................
Gain on sale of real estate ..................................................
Equity in income of joint ventures .....................................
Net income .........................................................................
$ 244,011
67,333
311,344
(43,103)
(29,542)
(1,783)
-
(117,081)
(54,504)
67
15,270
623
3,665
$ 84,956
$ 229,162
18,962
248,124
(38,659)
(2,991)
-
(683)
(58,506)
(37,124)
5
(494)
-
3,405
$ 113,077
General and administrative expenses increased $4.4 million or 11.5% from 2015 to 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 $1.7 million increase
in professional fees mainly stemming from an increase in accounting fees related to the acquisition of LifeStorage, LP and an
increase in legal fees related to the lawsuit in New Jersey. The remaining $1.8 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 a result of the LifeStorage, LP acquisition and other smaller acquisitions in 2016.
Acquisition related costs were $29.5 million in 2016 as a result of the acquisition of 122 stores, including the
acquisition of LifeStorage, LP. Acquisition related costs for 2015 were $3.0 million as a result of the acquisition of 27 stores.
The operating lease expense for storage facilities in 2015 relates to leases which commenced in November 2013
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
completed the purchase of these four facilities on February 2, 2015, thus eliminating the lease payments thereafter.
Depreciation and amortization expense increased to $117.1 million in 2016 from $58.5 million in 2015, primarily as
a result of amortization and depreciation related to the properties acquired in 2015 and 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 $37.1 million in 2015 to $54.5 million in 2016. The increase was primarily due to
interest on bridge loan financing entered into to facilitate the LifeStorage, LP acquisition as well as interest on the $600
million 3.5% senior notes issued in June 2016 and the $200 million 3.67% term loan entered into in July 2016, partially offset
by reduced interest costs as a result of the payoff of the $150 million 6.38% term loan in April 2016 with a draw on our line
of credit which carries a lower interest rate.
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.
These dispositions were not classified as
discontinued operations since they did not meet the criteria for such classification under ASU 2014-08 guidance.
33
YEAR ENDED DECEMBER 31, 2015 COMPARED TO YEAR ENDED DECEMBER 31, 2014
We recorded rental revenues of $338.4 million for the year ended December 31, 2015, an increase of $36.4 million
or 12.0% when compared to 2014 rental revenues of $302.0 million. Of the increase in rental revenue, $16.9 million resulted
from a 5.9% increase in rental revenues at the 399 core properties considered in same store sales (those properties included in
the consolidated results of operations in 2014 and 2015, excluding the properties we sold in 2015 and 2014). The increase in
same store rental revenues was a result of a 110 basis point increase in average occupancy and a 4.3% increase in rental
income per square foot. The remaining increase in rental revenue of $19.5 million resulted from the revenues from the
acquisition of 56 properties completed in 2014 and 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 a revenue decrease as a result of
three self-storage properties sold in 2015. Other operating income, which includes merchandise sales, insurance
administrative fees, truck rentals, management fees and acquisition fees, increased by $4.1 million for the year ended
December 31, 2015 compared to 2014 primarily as a result of increased administrative fees earned on customer insurance and
an increase in management fees.
Property operations and maintenance expenses increased $6.6 million or 8.7% in 2015 compared to 2014. The 399
core properties considered in the same store pool experienced a $1.3 million or 1.9% increase in operating expenses as a
result of increases in payroll and maintenance 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 $5.3
million from the acquisition of 56 properties completed since January 1, 2014 (excluding the four properties purchased in
2015 that had been leased since November 2013 and are included in the same store pool). Real estate tax expense increased
$4.5 million as a result of a 5.2% increase in property taxes on the 399 same store pool and the inclusion of taxes on the
properties acquired or leased in 2015 and 2014.
Our 2015 same store results consist of only those properties that were included in our consolidated results since
January 1, 2014, excluding the properties we sold in 2015 and 2014. The following table sets forth operating data for our 399
same store properties. These results provide information relating to property operating changes without the effects of
acquisition.
Same Store Summary
(dollars in thousands)
Year ended December 31,
2015
2014
Percentage
Change
Same store rental income ...................................................
Same store other operating income ....................................
Total same store operating income .................................
Payroll and benefits............................................................
Real estate taxes .................................................................
Utilities...............................................................................
Repairs and maintenance....................................................
Office and other operating expenses ..................................
Insurance ............................................................................
Advertising and yellow pages ............................................
Internet marketing ..............................................................
Total same store operating expenses...............................
Same store net operating income........................................
$301,525
16,406
317,931
27,469
31,593
10,925
12,400
10,294
4,059
1,297
5,319
103,356
$ 214,575
$ 284,613
14,791
299,404
26,518
30,041
11,389
11,256
10,390
4,152
1,441
5,307
100,494
$ 198,910
5.9%
10.9%
6.2%
3.6%
5.2%
(4.1%)
10.2%
(0.9%)
(2.2%)
(10.0%)
0.2%
2.8%
7.9%
Net operating income increased $29.5 million or 13.5% as a result of a 7.9% increase in our same store net operating
income and the acquisitions completed in 2014 and 2015.
34
Reclassification
Internet advertising expense, which had been included in the general and administrative expense line in the
Company’s 2014 financial statements, was reclassified to property operations and maintenance expense in 2015 to conform
to the then current year presentation. The Company believes the classification of internet advertising expenses as property
operations and maintenance expense is more consistent with industry trends. As a result of this reclassification, for the year
ended December 31, 2014, the Company’s financial statements show an increase in property operations and maintenance
expense and a reduction of general and administrative expenses of $5,570 (dollars in thousands) as compared to the amounts
originally reported in the Company’s 2014 financial statements for that period.
The following table reconciles NOI generated by our self-storage facilities to our net income presented in the 2015
and 2014 consolidated financial statements.
(dollars in thousands)
Net operating income
Same store
Other stores and management fee income
Total net operating income
General and administrative
Acquisition related costs
Operating leases of storage facilities
Depreciation and amortization
Interest expense
Interest income
(Loss) gain on sale of real estate
Equity in income of joint ventures
Net income
Year ended December 31,
2015
2014
$ 214,575
33,549
248,124
(38,659)
(2,991)
(683)
(58,506)
(37,124)
5
(494)
3,405
$ 113,077
$ 198,910
19,740
218,650
(35,222)
(7,359)
(7,987)
(51,749)
(34,578)
40
5,176
2,086
$ 89,057
General and administrative expenses increased $3.4 million or 9.8% from 2014 to 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 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 were $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 acquisition of 33 stores in 2014, and included a $1.3 million loan
defeasance cost paid by the Company.
The operating lease expense for storage facilities in the 2015 and 2014 periods relates to leases which commenced in
November 2013 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 completed the purchase of these four facilities on February 2, 2015, which eliminated the lease payment at
that time.
Depreciation and amortization expense increased to $58.5 million in 2015 from $51.8 million in 2014, primarily as a
result of depreciation on the properties acquired in 2014 and 2015.
Interest expense increased from $34.6 million in 2014 to $37.1 million in 2015. The increase was due to the
additional $175 million term note borrowings in April 2014 and additional line of credit borrowings in 2015 which were used
to fund a portion of our acquisitions.
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 facilities in Texas for net proceeds of approximately $11.0 million resulting in a gain on the sale of
real estate of $5.2 million. Since the 2014 and 2015 sales occurred subsequent to the Company’s adoption of ASU 2014-08,
these sales were not classified as discontinued operations since they did not meet the criteria for such classification under
ASU 2014-08 guidance.
35
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
(dollars in thousands)
2016
For Year Ended December 31,
2015
2014
2013
2012
Net income attributable to common shareholders ...
Net income attributable to noncontrolling interests
in the Operating Partnership ................................
Depreciation of real estate and amortization of
$ 85,225
$112,524
$ 88,531
$ 74,126
$55,128
398
553
526
469
513
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 .......................................
-
Depreciation and amortization from
unconsolidated joint ventures...............................
(Gain) loss on sale of real estate ..............................
Funds from operations allocable to noncontrolling
interest in the Operating Partnership....................
Funds from operations available to common
2,595
(15,270)
-
2,435
494
-
313
1,137
1,666
(5,176)
1,496
(2,852)
1,595
(5,185)
(857)
(848)
(806)
(742)
(881)
shareholders .........................................................
$187,622
$172,587
$135,568
$117,179
$92,460
36
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, 2016, the Company was in compliance with all debt covenants.
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, 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.
Cash flows from operating activities were $225.6 million, $186.2 million, and $146.1 million for the years ended
December 31, 2016, 2015, and 2014, respectively. The increases in operating cash flows from 2015 to 2016 and from 2014
to 2015 were primarily due to an increase in net income as adjusted for non-cash depreciation and amortization expenses
during these periods.
Cash used in investing activities was $1,796.1 million, $328.7 million, and $335.0 million for the years ended
December 31, 2016, 2015, and 2014 respectively. The increase in cash used from 2015 to 2016 was primarily a result of the
acquisition of LifeStorage, LP and other acquisitions made in 2016, 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 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 to 2015 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 $225.7 million in net proceeds from
the sale of common stock and $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 the indebtedness
outstanding on the Company’s unsecured line of credit.
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
37
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. 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. During 2014, we issued 924,403 shares under the Equity Program and
359,102 shares under our previous Equity Program for net proceeds of approximately $99.2 million. As of December 31,
2016, the Company has $59.3 million availability for issuance of shares under the current Equity Program which expires in
May 2017.
We implemented a Dividend Reinvestment Plan in March 2013. We issued 133,666 and 151,246 shares under the
plan in 2016 and 2015, respectively.
During 2016 and 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, 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.
38
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.
The following table summarizes our future contractual obligations:
CONTRACTUAL OBLIGATIONS
Contractual obligations
Line of credit .........................
Term notes .............................
Mortgages payable.................
Interest payments...................
Interest rate swap payments...
Land leases ............................
Expansion and enhancement
contracts ..............................
Building leases ......................
Self-storage facility
acquisitions ........................
Contribution to joint venture
for acquisitions under
contract ..............................
Total ......................................
Payments due by period (in thousands)
Total
$ 253,000
1,400,000
13,027
407,534
13,015
9,669
11,552
15,318
$
2017
-
-
353
53,970
4,033
566
11,552
1,866
2018-2019
$ 253,000
-
765
107,442
7,785
1,133
-
3,426
67,025
67,025
-
$
2020-2021
-
425,000
3,534
84,928
1,197
1,137
2022 and thereafter
-
$
975,000
8,375
161,194
-
6,833
-
3,429
-
-
6,597
-
21,900
$2,212,040
21,900
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
Interest rate swap payments include estimated net settlements of swap liabilities based on
December 31, 2016 rates.
forecasted variable rates.
39
At December 31, 2016, the Company was under contract to acquire five self-storage facilities for cash consideration
of approximately $67.0 million (net of property deposits of $3.7 million). One of the properties was acquired in February
2017 from an unrelated party for $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-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
financial 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 recently constructed facilities to 7.4% on 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 2017 and at December 31, 2016 we had five properties under contract to be
purchased for $67.0 million. One of the properties was acquired in February 2017.
In 2016, we added 343,000 square feet to existing Properties and converted 55,000 square feet to premium storage
for a total cost of approximately $22.4 million. In 2016 we also installed solar panels on six buildings for a total cost of
approximately $2.7 million. Although we do not expect to construct any new facilities in 2017, we do plan to complete
approximately $35.1 million in expansions and enhancements to existing facilities of which $12.6 million was paid prior to
December 31, 2016.
In 2016, the Company spent approximately $38.6 million for recurring capitalized expenditures including roofing,
paving, office renovations, and new signs related to our rebranding. We expect to spend $30.2 million in 2017 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.
We may seek to sell additional Properties to third parties or joint venture partners in 2017.
40
OFF-BALANCE SHEET ARRANGEMENTS
Our off-balance sheet arrangements consist of our investment in six self-storage joint ventures in which we have an
85%, 20%, 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 entities is secured by the real estate owned by these entities, and is non-recourse to us. See
Note 11 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 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 $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 $578
million at December 31, 2016, a 100 basis point increase in interest rates would have a $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, 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.
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.
INFLATION
41
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 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.
42
Item 8.
Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Life Storage, Inc.
We have audited the accompanying consolidated balance sheets of Life Storage, Inc. as of December 31, 2016 and
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, 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, 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 Life Storage, Inc. 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 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), 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
43
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 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), 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) and our report dated February 27, 2017 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Buffalo, New York
February 27, 2017
44
LIFE STORAGE, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
Assets
Investment in storage facilities:
Land.............................................................................................................
Building, equipment, and construction in progress .....................................
Less: accumulated depreciation ...................................................................
Investment in storage facilities, net ..............................................................
Cash and cash equivalents ............................................................................
Accounts receivable......................................................................................
Receivable from unconsolidated joint ventures ............................................
Investment in unconsolidated joint ventures.................................................
Prepaid expenses...........................................................................................
Fair value of interest rate swap agreements..................................................
Trade name ...................................................................................................
Other assets...................................................................................................
Total Assets ................................................................................................
Liabilities
Line of credit ................................................................................................
Term notes, net .............................................................................................
Accounts payable and accrued liabilities......................................................
Deferred revenue ..........................................................................................
Fair value of interest rate swap agreements..................................................
Mortgages payable........................................................................................
Total Liabilities...........................................................................................
December 31,
2016
2015
$
786,764
3,456,544
4,243,308
(535,704)
3,707,604
23,685
5,469
1,223
67,300
6,649
-
16,500
29,554
$ 3,857,984
$
480,176
2,011,526
2,491,702
(465,195)
2,026,507
7,020
6,805
929
62,520
5,431
550
-
9,060
$ 2,118,822
$ 253,000
1,387,525
75,132
9,700
13,015
13,027
1,751,399
$
79,000
746,650
47,839
7,511
15,343
1,993
898,336
Noncontrolling redeemable Operating Partnership Units at
redemption value ......................................................................................
18,091
18,171
Shareholders' Equity
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)..................................................................................
Additional paid-in capital .............................................................................
Dividends in excess of net income ...............................................................
Accumulated other comprehensive loss .......................................................
Total Shareholders' Equity..........................................................................
Noncontrolling interest in consolidated subsidiary.......................................
Total Equity ................................................................................................
Total Liabilities and Shareholders' Equity..................................................
See notes to consolidated financial statements.
464
2,348,567
(239,062)
(21,475)
2,088,494
-
2,088,494
$ 3,857,984
367
1,388,343
(171,980)
(14,415)
1,202,315
-
1,202,315
$ 2,118,822
45
LIFE STORAGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
Revenues
Rental income ........................................................................
Other operating income .........................................................
Total operating revenues......................................................
Expenses
Property operations and maintenance ....................................
Real estate taxes.....................................................................
General and administrative ....................................................
Acquisition costs....................................................................
Write-off of acquired property deposits.................................
Operating leases of storage facilities .....................................
Depreciation and amortization...............................................
Total operating expenses .....................................................
Year Ended December 31,
2016
2015
2014
$ 428,121
34,487
462,608
$ 338,435
28,167
366,602
$ 302,044
24,036
326,080
103,388
47,876
43,103
29,542
1,783
-
117,081
342,773
81,915
36,563
38,659
2,991
-
683
58,506
219,317
75,333
32,097
35,222
7,359
-
7,987
51,749
209,747
Income from operations.........................................................
119,835
147,285
116,333
Other income (expenses)
Interest expense ......................................................................
Interest expense – bridge financing commitment fee .............
Interest income .......................................................................
Gain (loss) on sale of storage facilities ...................................
Gain on sale of real estate.......................................................
Equity in income of joint ventures..........................................
Net income .............................................................................
Net income attributable to noncontrolling interest in the
(47,175)
(7,329)
67
15,270
623
3,665
(37,124)
(34,578)
-
5
(494)
-
3,405
-
40
5,176
-
2,086
84,956
113,077
89,057
Operating Partnership........................................................
(398)
(553)
(526)
Net loss attributable to noncontrolling interest in
consolidated subsidiary .....................................................
Net income attributable to common shareholders ..................
667
$ 85,225
-
$ 112,524
-
$ 88,531
Earnings per common share attributable to common
shareholders - basic ...........................................................
Earnings per common share attributable to common
shareholders - diluted
$ 1.97
$ 1.96
$ 3.18
$ 3.16
$ 2.68
$ 2.67
See notes to consolidated financial statements.
46
LIFE STORAGE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
Net income..............................................................................
Other comprehensive income:
Effective portion of loss on derivatives net of reclassification
to interest expense ...........................................................
Total comprehensive income ..................................................
Comprehensive income attributable to noncontrolling interest
in the Operating Partnership................................................
Comprehensive loss attributable to noncontrolling interest in
consolidated subsidiary .......................................................
Comprehensive income attributable to common shareholders
Year Ended December 31,
2016
2015
2014
$ 84,956
$ 113,077
$ 89,057
(7,060)
77,896
(1,410)
111,667
(6,603)
82,454
(365)
(546)
(487)
667
$ 78,198
-
$ 111,121
-
$ 81,967
See notes to consolidated financial statements.
47
LIFE 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)
Total
Shareholders’
Equity
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
Net proceeds from the issuance of common stock
through Dividend Reinvestment Plan ...............
Exercise of stock options ....................................
Issuance of non-vested stock...............................
Earned portion of non-vested stock .....................
Stock option expense ..........................................
Deferred compensation outside directors ............
Carrying value less than redemption value on
redeemed noncontrolling interest .....................
Adjustment to redemption value of noncontrolling
redeemable Operating Partnership Units ...........
Net income attributable to common shareholders
Change in fair value of derivatives......................
Dividends............................................................
Balance December 31, 2014 ...............................
Net proceeds from the issuance of common stock
Net proceeds from the issuance of common stock
through Dividend Reinvestment Plan ...............
Exercise of stock options ....................................
Issuance of non-vested stock...............................
Earned portion of non-vested stock .....................
Stock option expense ..........................................
Deferred compensation outside directors ............
Carrying value less than redemption value on
redeemed noncontrolling interest .....................
Adjustment to redemption value of noncontrolling
redeemable Operating Partnership Units ...........
Net income attributable to common shareholders
Change in fair value of derivatives......................
Dividends............................................................
Balance December 31, 2015 ...............................
Net proceeds from the issuance of common stock
Net proceeds from the issuance of common stock
through Dividend Reinvestment Plan ...............
Conversion of operating partnership units to
common shares.................................................
Issuance of non-vested stock...............................
Earned portion of non-vested stock .....................
Stock option expense ..........................................
Deferred compensation outside directors ............
Adjustment to redemption value of noncontrolling
redeemable Operating Partnership Units ...........
Net income attributable to common shareholders
Amortization of terminated hedge included in AOCI
Change in fair value of derivatives......................
Dividends............................................................
Balance December 31, 2016 ...............................
See notes to consolidated financial statements
1,283,505
171,854
27,462
90,143
-
-
-
-
-
-
-
-
34,105,955
2,329,911
151,246
30,900
64,244
-
-
28,417
-
-
-
-
-
36,710,673
9,545,000
133,666
41,862
23,405
-
-
-
-
-
-
-
-
46,454,606
$
13
2
-
1
-
-
-
-
-
-
-
-
341
23
1
1
1
-
-
-
-
-
-
-
-
367
96
1
-
-
-
-
-
-
-
-
-
-
464
98,968
12,447
1,245
(1)
4,556
223
121
(570)
-
-
-
-
1,156,225
210,119
13,925
1,632
(1)
6,254
210
59
(80)
-
-
-
-
1,388,343
934,867
13,165
4,795
-
7,216
89
92
-
-
-
-
-
$ 2,348,567
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,738)
88,531
-
(90,035)
(167,692)
-
-
(6,603)
-
(13,005)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,328)
112,524
-
(113,484)
(171,980)
-
-
(1,410)
-
(14,415)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
98,981
12,449
1,245
-
4,556
223
121
(570)
(3,738)
88,531
(6,603)
(90,035)
975,869
210,142
13,926
1,633
-
6,254
210
59
(80)
(3,328)
112,524
(1,410)
(113,484)
1,202,315
934,963
13,166
4,795
-
7,216
89
92
4,457
85,225
-
-
(156,764)
$ (239,062)
-
-
458
(7,518)
-
$ (21,475)
4,457
85,225
458
(7,518)
(156,764)
$ 2,088,494
48
LIFE STORAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Operating Activities
Net income ..................................................................................................................
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization......................................................................................
Amortization of debt issuance costs and bond discount................................................
(Gain) loss on sale of storage facilities.........................................................................
Gain on sale of real estate.............................................................................................
Write-off of acquired property deposits........................................................................
Equity in income of joint ventures................................................................................
Distributions from unconsolidated joint venture...........................................................
Non-vested stock earned ..............................................................................................
Stock option expense....................................................................................................
Changes in assets and liabilities (excluding the effects of acquisitions):
Accounts receivable ....................................................................................................
Prepaid expenses .........................................................................................................
(Advances to) receipts from joint ventures..................................................................
Accounts payable and other liabilities .........................................................................
Deferred revenue.........................................................................................................
Net cash provided by operating activities.....................................................................
Investing Activities
Acquisition of storage facilities, net of cash acquired .................................................
Improvements, equipment additions, and construction in progress .............................
Net proceeds from the sale of storage facilities ...........................................................
Net proceeds from the sale of real estate .....................................................................
Investment in unconsolidated joint ventures................................................................
Property deposits ........................................................................................................
Net cash used in investing activities.............................................................................
Financing Activities
Net proceeds from sale of common stock....................................................................
Proceeds from line of credit ........................................................................................
Repayment of line of credit .........................................................................................
Proceeds from term notes, net of discount...................................................................
Repayment of term note ..............................................................................................
Debt issuance costs......................................................................................................
Settlement of forward starting interest rate swaps .......................................................
Dividends paid - common stock ..................................................................................
Distributions to noncontrolling interest holders...........................................................
Redemption of operating partnership units..................................................................
Mortgage principal payments ......................................................................................
Net cash provided by financing activities.....................................................................
Net increase (decrease) in cash.....................................................................................
Cash at beginning of period..........................................................................................
Cash at end of period ...................................................................................................
Year Ended December 31,
2016
2015
2014
$ 84,956
$ 113,077
$ 89,057
117,081
9,688
(15,270)
(623)
1,783
(3,665)
5,207
7,308
89
4,814
(230)
(294)
18,494
(3,788)
225,550
(1,750,267)
(72,852)
34,074
623
(6,438)
(1,209)
(1,796,069)
948,129
1,102,000
(928,000)
796,682
(150,000)
(15,273)
(9,166)
(156,249)
(742)
-
(197)
1,587,184
16,665
7,020
$ 23,685
58,506
1,184
494
-
-
(3,405)
4,821
6,313
210
(1,038)
1,132
(346)
5,847
(597)
186,198
(280,010)
(41,739)
4,646
-
(6,151)
(5,435)
(328,689)
225,701
330,000
(300,000)
-
-
-
-
(113,039)
(555)
(1,005)
(134)
140,968
(1,523)
8,543
7,020
$
51,749
942
(5,176)
-
-
(2,086)
3,123
4,677
223
(606)
(457)
590
5,187
(1,155)
146,068
(281,731)
(35,097)
11,191
-
(28,650)
(706)
(334,993)
112,676
202,000
(202,000)
175,000
-
(3,001)
-
(90,035)
(541)
(6,028)
(127)
187,944
(981)
9,524
8,543
$
Supplemental cash flow information
Cash paid for interest, net of interest capitalized ..........................................................
Cash paid for income taxes, net of refunds...................................................................
$ 39,856
981
$
$ 35,926
$ 1,084
$ 31,764
665
$
See notes to consolidated financial statements.
49
LIFE STORAGE LP
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except unit data)
Assets
Investment in storage facilities:
Land.............................................................................................................
Building, equipment, and construction in progress .....................................
Less: accumulated depreciation ...................................................................
Investment in storage facilities, net ..............................................................
Cash and cash equivalents ............................................................................
Accounts receivable......................................................................................
Receivable from unconsolidated joint ventures ............................................
Investment in unconsolidated joint ventures.................................................
Prepaid expenses...........................................................................................
Fair value of interest rate swap agreements..................................................
Trade name ...................................................................................................
Other assets...................................................................................................
Total Assets ................................................................................................
Liabilities
Line of credit ................................................................................................
Term notes, net .............................................................................................
Accounts payable and accrued liabilities......................................................
Deferred revenue ..........................................................................................
Fair value of interest rate swap agreements..................................................
Mortgages payable........................................................................................
Total Liabilities...........................................................................................
Limited partners’ redeemable capital interest at redemption value (217,481
and 168,866 units outstanding at December 31, 2016 and December 31,
2015, respectively) ....................................................................................
Partners’ Capital
General partner (466,721 and 368,795 units outstanding at December 31,
December 31,
2016
2015
$
786,764
3,456,544
4,243,308
(535,704)
3,707,604
23,685
5,469
1,223
67,300
6,649
-
16,500
29,554
$ 3,857,984
$ 253,000
1,387,525
75,132
9,700
13,015
13,027
1,751,399
$ 480,176
2,011,526
2,491,702
(465,195)
2,026,507
7,020
6,805
929
62,520
5,431
550
-
9,060
$ 2,118,822
$
79,000
746,650
47,839
7,511
15,343
1,993
898,336
18,091
18,171
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)......................
Accumulated other comprehensive loss .......................................................
Total Controlling Partners’ Capital.............................................................
Noncontrolling interest in consolidated subsidiary.......................................
Total Partners’ Capital................................................................................
Total Liabilities and Partners’ Capital ........................................................
2,088,904
(21,475)
2,088,494
-
2,088,494
$ 3,857,984
1,204,525
(14,415)
1,202,315
-
1,202,315
$ 2,118,822
See notes to consolidated financial statements.
50
LIFE STORAGE LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per unit data)
Revenues
Rental income ........................................................................
Other operating income .........................................................
Total operating revenues......................................................
Expenses
Property operations and maintenance ....................................
Real estate taxes.....................................................................
General and administrative ....................................................
Acquisition costs....................................................................
Write-off of acquired property deposits.................................
Operating leases of storage facilities .....................................
Depreciation and amortization...............................................
Total operating expenses .....................................................
Year Ended December 31,
2016
2015
2014
$ 428,121
34,487
462,608
$ 338,435
28,167
366,602
$ 302,044
24,036
326,080
103,388
47,876
43,103
29,542
1,783
-
117,081
342,773
81,915
36,563
38,659
2,991
-
683
58,506
219,317
75,333
32,097
35,222
7,359
-
7,987
51,749
209,747
Income from operations.........................................................
119,835
147,285
116,333
Other income (expenses)
Interest expense ......................................................................
Interest expense – bridge financing commitment fee .............
Interest income .......................................................................
Gain (loss) on sale of storage facilities ...................................
Gain on sale of real estate.......................................................
Equity in income of joint ventures..........................................
Net income .............................................................................
Net income attributable to noncontrolling interest in the
(47,175)
(7,329)
67
15,270
623
3,665
(37,124)
-
5
(494)
-
3,405
(34,578)
-
40
5,176
-
2,086
84,956
113,077
89,057
Operating Partnership........................................................
(398)
(553)
(526)
Net loss attributable to noncontrolling interest in
consolidated subsidiary .....................................................
Net income attributable to common unitholders.....................
667
$ 85,225
-
$ 112,524
-
$ 88,531
Earnings per common unit attributable to common
unitholders - basic..............................................................
Earnings per common unit attributable to common
unitholders - diluted
Net income attributable to general partner .............................
Net income attributable to limited partners ............................
$ 1.97
$ 1.96
$
856
84,369
$ 3.18
$ 3.16
$ 1,131
111,393
$ 2.68
$ 2.67
$
891
87,640
See notes to consolidated financial statements.
51
LIFE STORAGE LP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
Net income..............................................................................
Other comprehensive income:
Effective portion of loss on derivatives net of reclassification
to interest expense ...........................................................
Total comprehensive income ..................................................
Comprehensive income attributable to noncontrolling interest
in the Operating Partnership................................................
Comprehensive loss attributable to noncontrolling interest in
consolidated subsidiary .......................................................
Comprehensive income attributable to common unitholders .
Year Ended December 31,
2016
2015
2014
$ 84,956
$ 113,077
$ 89,057
(7,060)
77,896
(1,410)
111,667
(6,603)
82,454
(365)
(546)
(487)
667
$ 78,198
-
$ 111,121
-
$ 81,967
See notes to consolidated financial statements.
52
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 ............................
Net proceeds from the issuance of Partnership Units through Dividend
Reinvestment Plan .............................................................................
Exercise of stock options ......................................................................
Earned portion of non-vested stock.......................................................
Stock option expense ............................................................................
Deferred compensation outside directors ..............................................
Carrying value less than redemption value on
redeemed noncontrolling interest .......................................................
Adjustment to redemption value of noncontrolling
redeemable Operating Partnership Units............................................
Net income attributable to common unitholders ...................................
Change in fair value of derivatives .......................................................
Distributions .........................................................................................
Balance December 31, 2014 .................................................................
Net proceeds from the issuance of Partnership Units ............................
Net proceeds from the issuance of Partnership Units through Dividend
Reinvestment Plan .............................................................................
Exercise of stock options ......................................................................
Earned portion of non-vested stock.......................................................
Stock option expense ............................................................................
Deferred compensation outside directors ..............................................
Carrying value less than redemption value on
redeemed noncontrolling interest .......................................................
Adjustment to redemption value of noncontrolling
redeemable Operating Partnership Units............................................
Net income attributable to common unitholders ...................................
Change in fair value of derivatives .......................................................
Distributions .........................................................................................
Balance December 31, 2015 .................................................................
Net proceeds from the issuance of Partnership Units ............................
Net proceeds from the issuance of Partnership Units through Dividend
Reinvestment Plan .............................................................................
Conversion of operating partnership units to common shares ...............
Issuance of operating partnership units .................................................
Earned portion of non-vested stock.......................................................
Stock option expense ............................................................................
Deferred compensation outside directors ..............................................
Adjustment to redemption value of noncontrolling
redeemable Operating Partnership Units............................................
Net income attributable to common unitholders ...................................
Amortization of terminated hedge included in AOCI............................
Change in fair value of derivatives .......................................................
Dividends .............................................................................................
Balance December 31, 2016 .................................................................
See notes to consolidated financial statements
1,014
124
13
46
2
1
(60)
-
891
(66)
(906)
9,895
2,123
139
16
63
2
-
(10)
97,967
12,325
1,232
4,510
221
120
(510)
(3,738)
87,640
66
(89,129)
978,979
208,019
13,787
1,617
6,191
208
59
(70)
-
1,131
(14)
(1,140)
12,205
(3,328)
111,393
14
(112,344)
1,204,525
9,349
925,614
132
-
95
72
1
1
13,034
4,795
(95)
7,144
88
91
-
-
-
-
-
-
-
-
-
(6,603)
-
(13,005)
-
-
-
-
-
-
-
-
-
(1,410)
-
(14,415)
-
-
-
-
-
-
-
-
856
4
(75)
(1,575)
21,065
$
4,457
84,369
(4)
75
(155,189)
$ 2,088,904
-
-
458
(7,518)
-
$ (21,475)
98,981
12,449
1,245
4,556
223
121
(570)
(3,738)
88,531
(6,603)
(90,035)
975,869
210,142
13,926
1,633
6,254
210
59
(80)
(3,328)
112,524
(1,410)
(113,484)
1,202,315
934,963
13,166
4,795
-
7,216
89
92
4,457
85,225
458
(7,518)
(156,764)
$ 2,088,494
53
LIFE STORAGE LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Operating Activities
Net income ..................................................................................................................
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization......................................................................................
Amortization of debt issuance costs and bond discount................................................
(Gain) loss on sale of storage facilities.........................................................................
Gain on sale of real estate.............................................................................................
Write-off of acquired property deposits........................................................................
Equity in income of joint ventures................................................................................
Distributions from unconsolidated joint venture...........................................................
Non-vested stock earned ..............................................................................................
Stock option expense....................................................................................................
Changes in assets and liabilities (excluding the effects of acquisitions):
Accounts receivable ....................................................................................................
Prepaid expenses .........................................................................................................
(Advances to) receipts from joint ventures..................................................................
Accounts payable and other liabilities .........................................................................
Deferred revenue.........................................................................................................
Net cash provided by operating activities.....................................................................
Investing Activities
Acquisition of storage facilities, net of cash acquired .................................................
Improvements, equipment additions, and construction in progress .............................
Net proceeds from the sale of storage facilities ...........................................................
Net proceeds from the sale of real estate .....................................................................
Investment in unconsolidated joint ventures................................................................
Property deposits ........................................................................................................
Net cash used in investing activities.............................................................................
Financing Activities
Net proceeds from sale of partnership units.................................................................
Proceeds from line of credit ........................................................................................
Repayment of line of credit .........................................................................................
Proceeds from term notes, net of discount...................................................................
Repayment of term note ..............................................................................................
Debt issuance costs......................................................................................................
Settlement of forward starting interest rate swaps .......................................................
Distributions to unitholders .........................................................................................
Distributions to noncontrolling interest holders...........................................................
Redemption of operating partnership units..................................................................
Mortgage principal payments ......................................................................................
Net cash provided by financing activities.....................................................................
Net increase (decrease) in cash.....................................................................................
Cash at beginning of period..........................................................................................
Cash at end of period ...................................................................................................
Year Ended December 31,
2016
2015
2014
$ 84,956
$ 113,077
$ 89,057
117,081
9,688
(15,270)
(623)
1,783
(3,665)
5,207
7,308
89
4,814
(230)
(294)
18,494
(3,788)
225,550
(1,750,267)
(72,852)
34,074
623
(6,438)
(1,209)
(1,796,069)
948,129
1,102,000
(928,000)
796,682
(150,000)
(15,273)
(9,166)
(156,249)
(742)
-
(197)
1,587,184
16,665
7,020
$ 23,685
58,506
1,184
494
-
-
(3,405)
4,821
6,313
210
(1,038)
1,132
(346)
5,847
(597)
186,198
(280,010)
(41,739)
4,646
-
(6,151)
(5,435)
(328,689)
225,701
330,000
(300,000)
-
-
-
-
(113,039)
(555)
(1,005)
(134)
140,968
(1,523)
8,543
$ 7,020
51,749
942
(5,176)
-
-
(2,086)
3,123
4,677
223
(606)
(457)
590
5,187
(1,155)
146,068
(281,731)
(35,097)
11,191
-
(28,650)
(706)
(334,993)
112,676
202,000
(202,000)
175,000
-
(3,001)
-
(90,035)
(541)
(6,028)
(127)
187,944
(981)
9,524
$ 8,543
Supplemental cash flow information
Cash paid for interest, net of interest capitalized ..........................................................
Cash paid for income taxes, net of refunds...................................................................
$ 39,856
981
$
$ 35,926
$ 1,084
$ 31,764
665
$
See notes to consolidated financial statements.
54
LIFE STORAGE, INC. AND LIFE STORAGE LP
DECEMBER 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
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”.
Also, consistent with these name changes, and in 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 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, 2016, we had an ownership interest in, and/or managed 659 self-storage properties in 29 states
under the names Life Storage® and Uncle Bob's Self Storage®. Among our 659 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, and 26 properties that we manage and have no ownership interest. Approximately 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 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 (the “Units”) are held by certain former owners of assets acquired by the Operating 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, and 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.
Included in the Parent Company’s consolidated balance sheets are noncontrolling redeemable operating partnership
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 sheets 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, 2016, there were 217,481
noncontrolling redeemable operating partnership Units outstanding (168,866 at December 31, 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
55
Units under the provisions of EITF D-98, "Classification and Measurement of Redeemable Securities" which was codified in
FASB ASC Topic 480-10-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 and in the Operating Partnership’s general partner and limited
partners capital balances. Accordingly, in the accompanying consolidated balance sheets, noncontrolling interests are
reflected at redemption value at December 31, 2016 and 2015, equal to the number of noncontrolling 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)
Beginning balance noncontrolling redeemable Operating Partnership Units ..............
Redemption of Operating Partnership Units..............................................................
Redemption value in excess of carrying value...........................................................
Issuance of Operating Partnership Units....................................................................
Net income attributable to noncontrolling interests in Operating Partnership ...........
Distributions .............................................................................................................
Adjustment to redemption value ...............................................................................
Ending balance noncontrolling redeemable Operating Partnership Units ...................
2016
$ 18,171
(4,795)
-
9,516
398
(742)
(4,457)
$ 18,091
2015
$ 13,622
(1,005)
80
2,148
553
(555)
3,328
$ 18,171
The following is a reconciliation of the Operating Partnership’s limited partners’ redeemable capital interest:
(Dollars in thousands)
Beginning balance Limited Partners’ Redeemable Capital Interest.............................
Redemption of Limited Partners’ Redeemable Capital Interest Units .......................
Redemption value in excess of carrying value...........................................................
Issuance of Limited Partners’ Redeemable Capital Interest Units.............................
Net income attributable to Limited Partners’ Redeemable Capital Interest...............
Distributions .............................................................................................................
Adjustment to redemption value ...............................................................................
Ending balance Limited Partners’ Redeemable Capital Interest..................................
2016
$ 18,171
(4,795)
-
9,516
398
(742)
(4,457)
$ 18,091
2015
$ 13,622
(1,005)
80
2,148
553
(555)
3,328
$ 18,171
In 2016 the Operating Partnership issued 90,477 Units with a fair value of $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 dates of issuance was determined based upon the fair market value of the Company’s
common stock on 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.
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 $1.0 million and $0.4
million at December 31, 2016 and 2015, respectively.
56
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, 2016, 2015, and 2014, advertising costs were $9.5 million, $7.3 million, and
$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 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, $29.5 million, $3.0 million, and $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, 2016, 2015, and 2014 was $0.1 million 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 flows 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,
2016, 2015 and 2014, no assets have 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.
57
Other Assets: Included in other assets are cash balances held in escrow for encumbered properties, property deposits
and the value placed on in-place customer leases at the time of acquisition. Cash held in escrow for encumbered properties at
December 31, 2016 and 2015, totaled $238,000 and $12,000, respectively. Property deposits at December 31, 2016 and 2015
were $2.4 million and $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 8. The Company amortizes in-
place customer leases on a straight-line basis over 12 months (the estimated future benefit period).
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 variable 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.
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, 2016, 2015 and 2014, the Company recorded federal and state income tax
expense of $0.4 million, $1.3 million, and $0.9 million, respectively. The 2016 income tax expense includes current expense
of $0.1 million and deferred tax expense of $0.3 million. At December 31, 2016 and 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, 2016 and 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
sheets. As of December 31, 2016, the Company’s taxable REIT subsidiary has prepaid taxes of $0.4 million, deferred tax
assets of $1.5 million and a deferred tax liability of $2.2 million. As of December 31, 2015, the Company’s taxable REIT
subsidiary had prepaid taxes of $0.2 million and a deferred tax liability of $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.
58
Recent Accounting Pronouncements: In May 2014, the 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, 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.
We are currently evaluating the alternative methods of adoption and the effect 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 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 adoption of ASU 2014-12 by 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.
59
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 840 Leases (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.
60
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, respectively, related to stock options and $7.2 million, $6.3 million, and $4.6 million, respectively,
related to amortization of non-vested stock grants for the years ended December 31, 2016, 2015 and 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 fair value of options granted during the years ended
December 31, 2015 and 2014, were $9.90 and $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 2016, 2015 and 2014, the Company issued performance based non-vested stock awards to certain executives.
The fair value for the performance based awards in 2016, 2015 and 2014 was estimated at the time the awards were granted
using a Monte Carlo pricing model applying the following assumptions:
Expected life (years) .................................
Risk free interest rate ................................
Expected volatility ....................................
Fair value ......................................................
2016
3.0
1.53%
19.37%
$80.24
2015
3.0
1.33%
18.88%
$101.43
2014
3.0
1.18%
18.42%
$46.95
61
The Monte Carlo pricing model was not used to value any other 2016, 2015 and 2014 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 and the Operating Partnership have calculated their basic and diluted earnings per
share/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.
(Amounts in thousands, except per share data)
2016
Year Ended December 31,
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.........................
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 attributable to common shareholders ...................
Diluted Earnings per common share attributable to common shareholders ................
43,184
223
43,407
$ 1.97
$ 1.96
35,379
222
35,601
$ 3.18
$ 3.16
33,019
172
33,191
$ 2.68
$ 2.67
62
The following table sets forth the computation of basic and diluted earnings per common unit utilizing the two-class
method.
(Amounts in thousands, except per unit data)
2016
Year Ended December 31,
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 ............................
Effect of Dilutive Securities:
Stock options and non-vested stock...........................................................................
Denominator for diluted earnings per share - adjusted weighted average units and
assumed conversion..............................................................................................
Basic Earnings per common unit attributable to common unitholders ......................
Diluted Earnings per common unit attributable to common unitholders ...................
43,184
223
43,407
$ 1.97
$ 1.96
35,379
222
35,601
$ 3.18
$ 3.16
33,019
172
33,191
$ 2.68
$ 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, because their effect
would be antidilutive.
4. INVESTMENT IN STORAGE FACILITIES
The following summarizes activity in storage facilities during the years ended December 31, 2016 and
December 31, 2015.
(Dollars in thousands)
Cost:
2016
2015
Beginning balance ................................................................
Acquisition of storage facilities ............................................
Improvements and equipment additions ...............................
Net increase in construction in progress ...............................
Dispositions ..........................................................................
Ending balance........................................................................
$2,491,702
1,714,029
65,860
7,525
(35,808)
$4,243,308
$2,177,983
278,572
39,807
2,239
(6,899)
$2,491,702
Accumulated Depreciation:
Beginning balance ................................................................
Additions during the year .....................................................
Dispositions ..........................................................................
Ending balance........................................................................
$ 465,195
87,219
(16,710)
$ 535,704
$ 411,701
55,101
(1,607)
$ 465,195
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.
63
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 other 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” and 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 at 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 improvements components based
upon their relative fair values. The assets and liabilities of the other 20 storage facilities 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 acquired in 2016 and the 27 facilities acquired in 2015 has been assigned as
follows (as of December 31, 2016 the purchase price assignments relating to the facilities acquired during the second half of
2016 are preliminary):
(dollars in thousands)
Consideration paid
Acquisition Date Fair Value
Number
of
Date of
States
Properties Acquisition
Purchase
Price
Cash Paid
Value of
Operating
Partnership
Units
Issued
Mortgage
Assumed
Net Other
Liabilities
Assumed
(Assets
Acquired)
Building,
Equipment,
and
Improvements
In-Place
Customer
Leases
Trade
Name
Land
1/6/2016
$
20,350
$
20,246
$
2016
FL
CA
NH
MA
TX
AZ
FL
PA
CO
CA
CA
CA
CT
NY
FL
TX
NY
CA, CO, FL, IL, MS,
NV, TX, UT, WI
SC
CO
FL
IL
FL
Total acquired 2016
4
4
5
1
3
1
1
1
1
3
1
1
2
2
1
1
2
83
1
1
1
1
1
122
1/21/2016
1/21/2016
1/21/2016
1/21/2016
2/1/2016
2/12/2016
2/17/2016
2/29/2016
3/16/2016
3/17/2016
4/11/2016
4/14/2016
4/26/2016
5/2/2016
5/5/2016
5/19/2016
80,603
55,435
11,387
38,975
9,275
11,274
5,750
12,600
68,832
17,320
36,750
17,313
24,312
8,100
10,800
8,400
80,415
55,151
11,362
38,819
9,261
11,270
5,732
12,549
63,965
17,278
33,346
17,152
20,143
4,006
10,708
8,366
7/15/2016
7/29/2016
8/4/2016
9/27/2016
11/17/2016
12/20/2016
1,299,740
8,620
1,335,274
8,617
8,900
10,500
8,884
9,800
8,831
10,407
7,125
6,900
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,249
4,036
-
-
-
-
-
-
-
4,472
-
3,294
-
-
-
-
-
-
-
-
-
1,750
$
104
188
284
25
156
14
4
18
51
395
42
110
161
(80)
58
92
34
$ 6,646
$
13,339
$ 365
$
28,420
13,281
4,880
19,796
988
2,294
1,768
4,528
22,647
6,728
17,445
6,142
5,710
3,018
2,333
714
51,145
41,237
6,341
18,598
8,224
8,980
3,879
7,915
45,371
10,339
18,840
10,904
18,201
4,922
8,302
7,521
1,038
917
166
581
63
-
103
157
814
253
465
267
401
160
165
165
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Closing
Costs
Expensed
$
437
397
657
81
299
136
-
164
188
313
132
141
204
372
161
133
213
(35,534)
3
150,660
920
1,085,750
7,700
46,830
-
16,500
-
25,398
-
69
93
9
(66)
5,062
2,809
371
3,268
3,679
7,523
8,513
6,378
159
168
-
154
-
-
-
-
119
244
-
98
-
2,966
$1,783,920
$1,796,923
$ 9,516
$ 11,251
$ (33,770)
$310,428
$ 1,403,601
$ 53,391
$16,500
$29,887
64
(dollars in thousands)
Consideration paid
Acquisition Date Fair Value
State
Number of
Properties
Date of
Acquisition
Purchase
Price
Cash Paid
Value of
Operating
Partnership
Units Issued
Net Other
Liabilities
Assumed
(Assets
Acquired)
Building,
Equipment, and
Improvements
In-Place
Customer
Leases
Closing
Costs
Expensed
Land
2015
CT
NY
IL
IL
FL
TX
FL
FL
AZ
MA
NY
NC
SC
PA
2
2
1
1
1
1
1
4
1
1
4
1
6
1
2/2/2015
$ 61,116
$
62,377
$
2/2/2015
57,900
59,103
2/5/2015
3/9/2015
4/1/2015
4/16/2015
4/21/2015
6,800
8,690
6,290
8,800
8,750
6,652
6,466
6,236
8,713
8,687
5/1/2015
32,465
32,279
6/16/2015
7,904
6/19/2015
10,291
8/25/2015
17,900
9/1/2015
3,775
7,904
10,286
17,690
3,762
9/1/2015
44,000
43,564
12/30/2015
6,550
6,541
-
-
-
2,148
-
-
-
-
-
-
-
-
-
-
$
(1,261)
$
19,389
$
41,727
$
(1,203)
148
76
54
87
63
186
-
5
210
13
436
9
10,084
47,816
2,579
1,719
1,793
3,864
2,118
4,066
6,971
4,382
4,777
6,501
12,184
19,672
852
2,110
4,685
718
17,461
1,926
7,052
8,181
12,826
2,977
25,644
4,498
-
-
155
-
115
159
131
609
-
-
389
80
895
126
$
-
-
146
-
359
140
122
516
-
-
409
80
684
190
Total acquired 2015
27
$ 281,231
$
280,260
$
2,148
$
(1,177)
$
81,482
$
197,090
$
2,659
$
2,646
All of the properties acquired 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 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 $280.3 million paid at closing for the properties acquired during 2015, $250,000 represented deposits
that were paid in 2014 when certain of these properties originally went under contract. Closing costs totaling $345,000 were
incurred and expensed in 2015 related to facilities acquired in 2016 and are reflected in totals for the respective 2016
acquisitions in the charts above.
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 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 sheets as follows:
(dollars in thousands)
In-place customer leases .........................................................
Accumulated amortization ......................................................
Net carrying value at December 31, .......................................
2016
$ 75,611
(50,782)
$ 24,829
2015
$ 22,320
(21,017)
$ 1,303
65
Amortization expense related to in-place customer leases was $29.9 million, $3.4 million, and $4.1 million, for the
years ended December 31, 2016, 2015, and 2014, respectively. Amortization expense on 2016 acquisitions is expected to be
$24.8 million in 2017.
As noted above, during 2016, the Company acquired 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 119 properties acquired during 2016, and accounted for as business acquisitions, as if the acquisitions had
occurred as of January 1, 2015:
(dollars in thousands)
Total revenues.............................................................................
Net income attributable to common shareholders.......................
Earnings per common share
2016
$ 513,565
$ 154,522
2015
$ 465,614
$ 54,144
Basic ....................................................................................
Diluted .................................................................................
$ 3.34
$ 3.33
$ 1.17
$ 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 since the acquisition dates that are included in the
Company’s 2016 consolidated statement of operations related to the 119 properties acquired and accounted for as business
combinations during 2016.
(dollars in thousands)
Total revenues...................................................................................
Net loss attributable to common shareholders ..................................
$ 68,526
$ (52,814)
The above net loss attributable to common shareholders was primarily due to amortization of in-place customer
leases acquired and the acquisition costs incurred in connection with the 2016 acquisitions.
Property Dispositions
During 2016 the Company sold eight non-strategic properties with a carrying value of $18.8 million and received
cash proceeds of $34.1 million, resulting in a $15.3 million gain on sale. During 2015 the Company sold three non-strategic
properties purchased in 2014 and 2015 with a carrying value of $5.1 million and received cash proceeds of $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.
66
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)
Total revenues .............................................................................
Property operations and maintenance expense ............................
Real estate tax expense................................................................
Depreciation and amortization expense.......................................
Gain (loss) on sale of storage facilities........................................
2016
$ 2,324
(614)
(98)
(359)
15,270
$ 16,523
2015
$ 4,801
(1,401)
(295)
(780)
(494)
$ 1,831
2014
$ 5,782
(1,477)
(424)
(820)
5,176
$ 8,237
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 $8.2
million in 2016 as depreciation was accelerated over the new useful lives. The Company estimates that this change will
result in depreciation expense of approximately $1 million in 2017 as a result of the replacement of this existing Uncle Bob's
Self Storage® signage.
The accelerated depreciation reduced 2016 basic and diluted earnings by approximately $0.19 per share/unit.
5. UNSECURED LINE OF CREDIT AND TERM NOTES
Borrowings outstanding on our unsecured line of credit and term notes are as follows:
(Dollars in thousands)
Revolving line of credit borrowings .....................................
Term note due April 26, 2016 ..............................................
Term note due June 4, 2020 .................................................
Term note due August 5, 2021 .............................................
Term note due April 8, 2024 ................................................
Senior term note due July 1, 2026 ........................................
Term note due July 21, 2028 ................................................
Total term note principal balance outstanding......................
Less: unamortized debt issuance costs ............................
Less: unamortized senior term note discount ..................
Term notes payable ..............................................................
Dec. 31,
2016
$ 253,000
-
325,000
100,000
175,000
600,000
200,000
$ 1,400,000
(9,323)
(3,152)
$ 1,387,525
Dec. 31,
2015
$79,000
150,000
325,000
100,000
175,000
-
-
$ 750,000
(3,350)
-
$ 746,650
In January 2016, the Company exercised the expansion feature on 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 annual 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 an annual 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.
67
On May 17, 2016, the Company entered into two senior unsecured acquisition bridge facilities (the “Bridge
In
Facilities”) totaling $1,675 million with the Company’s third-party advisors to the LS acquisition (see Note 4).
consideration for the bridge financing commitments, the Company paid fees totaling $7.3 million which are included as
interest expense – bridge financing commitment fee in the 2016 consolidated statement of operations. The Bridge Facilities
commitments were not drawn upon and were terminated on June 29, 2016.
On June 20, 2016, the Operating 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 2026 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 par of $3.3 million and underwriting discount and other offering expenses of $5.5 million, totaled
$591.2 million. The indenture under which the 2026 Senior Notes were issued restricts the ability of the Company and its
subsidiaries to incur debt unless the Company and its consolidated subsidiaries comply with a leverage ratio not to exceed
60% and an interest coverage ratio of more than 1.5:1 on all outstanding debt, after giving effect to the incurrence of the debt.
The indenture also restricts the ability of the 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 incurrence of
the debt. The indenture also contains other financial and customary covenants, including a covenant not to own
unencumbered assets with a value less than 150% of the unsecured indebtedness of the Company and its consolidated
subsidiaries. As of December 31, 2016, the Company was in compliance with all of the financial covenants under the 2026
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 then outstanding balance on the
Company’s line of 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 had maintained a $150 million unsecured term note maturing 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.
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.
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.
68
6.
MORTGAGES PAYABLE AND DEBT MATURITIES
Mortgages payable at December 31, 2016 and 2015 consist of the following:
(dollars in thousands)
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%) ..................................
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%) ..................................
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%) ..................................
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%) ...............................................
Total mortgages payable.................................................................................
December 31,
2016
December 31,
2015
$
2,966
$
4,207
4,002
-
-
-
1,852
$ 13,027
1,993
$ 1,993
The table below summarizes the Company's debt obligations and interest rate derivatives at December 31, 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 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.
2017
2018
2019
2020
2021
Thereafter
Total
Fair
Value
Expected Maturity Date Including Discount
(dollars in thousands)
Line of credit - variable rate LIBOR + 1.10%
(1.79% at December 31, 2016) ..........................
Notes Payable:
Term note - variable rate LIBOR+1.15%
(1.92% at December 31, 2016) .....................
Term note - fixed rate 5.54% .............................
Term note - fixed rate 4.533% ...........................
Term note - fixed rate 3.50% .............................
Term note - fixed rate 3.67% .............................
-
-
-
-
-
-
-
-
-
-
-
-
Mortgage note - fixed rate 4.98% ......................
$ 51
$ 53
Mortgage note - fixed rate 4.065% ....................
Mortgage note - fixed rate 5.26% ......................
Mortgage note - fixed rate 5.99% ......................
Interest rate derivatives – liability......................
$ 88
$ 63
$ 151
-
$ 92
$ 67
$ 160
-
$ 253,000
-
-
-
-
-
-
56
96
71
170
-
$ 325,000
-
-
-
-
58
99
74
181
-
$
$
$
$
$
$
$
$
-
-
$ 100,000
-
$ 253,000
$253,000
-
-
$ 325,000
$325,000
$ 100,000
$109,379
-
-
-
$ 175,000 $ 175,000
$181,567
$ 600,000 $ 600,000
$574,126
$ 200,000 $ 200,000
$188,284
$ 2,748
$
104
$
$
78
192
-
-
$ 2,966
$ 2,966
$ 3,728 $ 4,207
$ 4,210
$ 3,649 $ 4,002
$ 4,281
$
998
$ 1,852
$ 1,997
-
-
$ 13,015
69
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 sheets 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 de minimis in 2016, 2015, and 2014.
The Company has interest rate swap agreements in effect at December 31, 2016 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
$125 Million ......................
$100 Million ......................
$100 Million ......................
$100 Million ......................
$125 Million ......................
9/1/2011
12/30/11
9/4/13
12/29/17
8/1/18
8/1/18
12/29/17
9/4/18
11/29/19
6/1/20
Fixed
Rate Paid
Floating Rate
Received
2.3700%
1.6125%
1.3710%
3.9680%
4.1930%
1 month LIBOR
1 month LIBOR
1 month LIBOR
1 month LIBOR
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 2016, 2015, and 2014, the net reclassification from AOCL to
interest expense was $4.6 million, $5.2 million, and $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 $4.0 million in 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 $13.0
million at December 31, 2016 and an asset of $550,000 and a liability of $15.3 million at December 31, 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
70
loan covenant provisions would result in the Company being in default on the interest rate swap agreements. As of
December 31, 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, 2016, it could have been required to settle its obligations under the
agreements at their net termination value of $13.0 million.
The changes in AOCL for the years ended December 31, 2016, 2015 and 2014 are summarized as follows:
(dollars in thousands)
Accumulated other comprehensive loss beginning of
Jan. 1, 2016
to
Dec. 31, 2016
Jan. 1, 2015
to
Dec. 31, 2015
Jan. 1, 2014
to
Dec. 31, 2014
period ........................................................................
$ (14,415)
$ (13,005)
$ (6,402)
Realized loss reclassified from accumulated other
comprehensive loss to interest expense ....................
Unrealized loss from changes in the fair value of the
effective portion of the interest rate swaps ..............
Loss included in other comprehensive loss ..................
Accumulated other comprehensive loss end of period .
5,044
5,229
5,506
(12,104)
(7,060)
$ (21,475)
(6,639)
(1,410)
$ (14,415)
(12,109)
(6,603)
$ (13,005)
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.
Refer to Note 6 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, 2016 and December 31, 2015 (dollars in thousands):
December 31, 2016
Interest rate swaps.......................................
December 31, 2015
Interest rate swaps.......................................
Interest rate swaps.......................................
Asset
(Liability)
$ (13,015)
550
(15,343)
Level 1
Level 2
Level 3
-
-
-
$ (13,015)
550
(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 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 122 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
71
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 are 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 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.
9. STOCK BASED COMPENSATION
The Company established the 2015 Award and Option Plan (the "2015 Plan") which replaced the expired 2005
Award and Option Plan for the purpose of attracting and retaining the Company's executive officers and other key
employees, such plans being the “Plans”. There were 561,000 shares authorized for issuance under the 2015 Plan. Options
granted under the Plans 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, 2016, options for 77,206 shares were outstanding under the Plans and options for
435,570 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 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. Prior to 2016, the Non-employee Plan provided 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 2016, 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, 2016, options for 18,500 common shares and 16,984 of non-vested shares
were outstanding under the Non-employee Plans. As of December 31, 2016 options for 71,016 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:
2016
2015
2014
Outstanding at beginning
of year: ...............................
Granted ..................................
Exercised ...............................
Adjusted / (forfeited) .............
Options
95,706
-
-
-
Weighted
average
exercise
price
$ 52.08
-
-
-
Weighted
average
exercise
price
$ 48.54
91.58
52.87
-
Options
115,606
11,000
(30,900)
-
Weighted
average
exercise
price
$ 44.82
76.01
45.34
40.07
Options
130,568
14,000
(27,462)
(1,500)
Outstanding at end of year .....
95,706
$ 52.08
95,706
$ 52.08
115,606
$ 48.54
Exercisable at end of year......
92,706
$ 51.31
63,815
$ 48.73
67,316
$ 49.18
72
A summary of the Company's stock options outstanding at December 31, 2016 follows:
Outstanding
Exercisable
Exercise Price Range
$30.00 – 39.99 .....................................
$40.00 – 69.99 .....................................
$70.00 – 91.58 .....................................
Total.....................................................
Options
1,100
77,106
17,500
95,706
Weighted
average
exercise
price
$ 35.73
$ 44.67
$ 85.78
$ 52.08
Options
1,100
77,106
14,500
92,706
Weighted
average
exercise
price
$ 35.73
$ 44.67
$ 87.82
$ 51.31
Intrinsic value of outstanding stock options at December 31, 2016 ......................................
Intrinsic value of exercisable stock options at December 31, 2016 .......................................
$ 3,244,663
$ 3,216,643
The intrinsic value of stock options exercised during the years ended December 31, 2016, 2015, and 2014 was $0,
$1.4 million, and $0.9 million, respectively.
Proceeds from stock options exercised during the years ended December 31, 2016, 2015, and 2014 amounted to $0,
$1.6 million, and $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, 2016, or the price on the date of exercise for those
exercised during the year. As of December 31, 2016, there was approximately $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 1.5 years. The weighted average remaining contractual life of
all options is 2.9 years, and for exercisable options is 2.8 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, 2016, the fair market value of the non-vested stock on the
date of grant ranged from $82.52 to $117.27. During 2016, 23,405 shares of non-vested stock were issued to employees and
directors with an aggregate fair value of $2.1 million. The Company charges the fair value ratably 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 do 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:
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
Unvested at beginning
of year: ...............................
305,520
$ 59.09
310,463
$ 51.93
293,196
$ 49.20
Granted ..................................
Vested ....................................
Forfeited.................................
23,405
(70,762)
-
89.30
69.82
-
64,665
(69,187)
(421)
94.74
60.28
76.07
92,665
(72,876)
(2,522)
60.87
53.11
28.66
Unvested at end of year .........
258,163
$ 58.89
305,520
$ 59.09
310,463
$ 51.93
73
Compensation expense of $7.2 million, $6.3 million, and $4.6 million was recognized for the vested portion of non-
vested stock grants in 2016, 2015, and 2014, respectively. The fair value of non-vested stock that vested during 2016, 2015,
and 2014 was $4.9 million, $4.2 million, and $3.9 million, respectively. The total unrecognized compensation cost related to
non-vested stock was $9.6 million at December 31, 2016, and the remaining weighted-average period over which this
expense will be recognized was 3.4 years.
Performance-based awards
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. The 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 awards 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-based award granted
under the Plans on the date of grant using a Monte Carlo simulation that uses the assumptions noted in Note 2.
During 2016, compensation expense of $2.6 million (included in the $7.2 million discussed above) was recognized
for performance awards granted in 2014 and prior. The total unrecognized compensation cost related to non-vested
performance awards was $3.9 million at December 31, 2016 and the weighted-average period over which this expense will be
recognized is 1.6 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 20,513 units outstanding at December 31, 2016. Fees that were earned and
credited to Directors’ accounts are recorded as compensation expense which totaled $0.1 million annually in each of 2016,
2015, and 2014.
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. In 2015 and 2014, the Company contributed 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 $505,000, $276,000, and
$192,000 for the years ended December 31, 2016, 2015 and 2014, respectively.
11. INVESTMENT IN JOINT VENTURES
The Company has a 20% ownership interest in Sovran HHF Storage Holdings LLC (“Sovran HHF”), a joint venture
that owns 39 self-storage properties that are managed by the Company. The carrying value of the Company’s investment at
December 31, 2016 and 2015 was $43.8 million and $44.6 million, respectively. In 2014, the Company contributed $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
74
December 31, 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 owns 30 self-storage properties that are managed by the Company. The carrying value of the Company’s
investment at December 31, 2016 and 2015 was $13.5 million and $13.9 million, respectively. In 2015 the Company
contributed $1.7 million in cash to the joint venture as its share of capital required to fund the payoff of 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 for 2016, 2015, and 2014, respectively. The
Company also received an acquisition fee of $0.4 million for securing purchases for Sovran HHF and Sovran HHF II in 2014.
The Company's share of Sovran HHF and Sovran HHF II’s income for 2016, 2015, and 2014 was $3.4 million, $3.2 million,
and $1.9 million, respectively.
The Company 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 $0.4 million
and $0.5 million at December 31, 2016 and 2015, respectively, and is included in accounts payable and accrued liabilities in
the accompanying consolidated balance sheets. For the years ended December 31, 2016, 2015, and 2014, the Company's
share of Iskalo Office Holdings, LLC's income was $214,000, $189,000, and $107,000, respectively. The Company paid rent
to Iskalo Office Holdings, LLC of $1.2 million, $1.1 million, and $1.0 million in 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.
75
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 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, 2016 is as follows:
(dollars in thousands)
Balance Sheet Data:
Investment in storage facilities, net ......................
Investment in office building ...............................
Other assets ..........................................................
Total Assets........................................................
Due to the Company.............................................
Mortgages payable ...............................................
Other liabilities.....................................................
Total Liabilities ..................................................
Unaffiliated partners' equity .................................
Company equity ...................................................
Total Partners’ Equity ..........................................
Total Liabilities and Partners' Equity .................
Income Statement Data:
Total revenues ......................................................
Property operating expenses.................................
Administrative, management and call center fees
Depreciation and amortization of customer list....
Amortization of financing fees.............................
Income tax expense ..............................................
Interest expense ....................................................
Net income ........................................................
$ 534,719
5,008
17,440
$ 557,167
$
1,223
220,456
7,394
229,073
262,944
65,150
328,094
$ 557,167
$ 74,034
(23,879)
(5,389)
(13,946)
(354)
(232)
(10,258)
$ 19,976
The Company does not guarantee the debt of Sovran HHF, Sovran HHF II, Iskalo Office Holdings, LLC, Urban
Box, McDonald, Merrick, or 191 III.
76
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, Iskalo Office Holdings, LLC, Urban Box, McDonald, Merrick, and 191 III
for the three years ended December 31, 2016 are as follows:
(dollars in thousands)
Statement of Operations
Other operating income (management fees and acquisition fee
income) ....................................................................................
General and administrative expenses (corporate office rent) ........
Equity in income of joint ventures ................................................
Distributions from unconsolidated joint ventures .........................
(Advances to) receipts from joint ventures ...................................
Year ended December 31,
2016
2015
2014
$ 4,891
1,214
3,665
5,207
(294)
$ 4,889
1,053
3,405
4,821
(346)
$ 4,231
1,023
2,086
3,123
590
Investing activities
Investment in unconsolidated joint ventures .................................
(6,438)
(6,151)
(28,650)
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.
77
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. 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 133,666 and 151,246
shares under the plan in 2016 and 2015, respectively.
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,
2016 and 2015 (dollars in thousands, except per share data):
Operating revenue ..................................
Net income (loss) ....................................
Net income (loss) attributable to
common shareholders ..........................
Net income (loss) per share attributable to
common shareholders
Basic .....................................................
Diluted ..................................................
Operating revenue ..................................
Net income..............................................
Net income attributable to common
shareholders ..........................................
Net income per share attributable to common
shareholders
Basic .....................................................
Diluted ..................................................
Mar. 31
Jun. 30
Sept. 30
Dec. 31
2016 Quarter Ended
$ 99,124
28,230
$ 107,005
43,504
$ 127,801
(4,969)
$ 128,678
18,191
28,339
43,456
(4,738)
18,168
$
$
0.74
0.73
$
$
1.04
1.03
$
$
(0.10)
(0.10)
$
$
0.39
0.39
Mar. 31
Jun. 30
Sept. 30
Dec. 31
2015 Quarter Ended
$ 85,408
22,557
$ 90,726
28,676
$ 95,428
31,661
$ 95,040
30,183
22,451
28,532
31,504
30,037
$
$
0.65
0.65
$
$
0.81
0.80
$
$
0.88
0.88
$
$
0.83
0.83
78
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):
Operating revenue ..................................
Net income (loss) ....................................
Net income (loss) attributable to
common unitholders ............................
Net income (loss) per unit attributable to
common unitholders
Basic .....................................................
Diluted ..................................................
Operating revenue ..................................
Net income..............................................
Net income attributable to common
unitholders ............................................
Net income per unit attributable to common
unitholders
Basic .....................................................
Diluted ..................................................
Mar. 31
Jun. 30
Sept. 30
Dec. 31
2016 Quarter Ended
$ 99,124
28,230
$ 107,005
43,504
$ 127,801
(4,969)
$ 128,678
18,191
28,339
43,456
(4,738)
18,168
$
$
0.74
0.73
$
$
1.04
1.03
$
$
(0.10)
(0.10)
$
$
0.39
0.39
Mar. 31
Jun. 30
Sept. 30
Dec. 31
2015 Quarter Ended
$ 85,408
22,557
$ 90,726
28,676
$ 95,428
31,661
$ 95,040
30,183
22,451
28,532
31,504
30,037
$
$
0.65
0.65
$
$
0.81
0.80
$
$
0.88
0.88
$
$
0.83
0.83
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 a building lease and the lease of the Company’s headquarters are as follows
(dollars in thousands):
Year ending December 31:
2017.........................................................
2018.........................................................
2019.........................................................
2020.........................................................
2021.........................................................
Thereafter ................................................
Total ........................................................
$ 2,432
2,332
2,227
2,278
2,288
13,431
$ 24,988
79
At December 31, 2016, the Company was under contract to acquire five self-storage facilities for cash consideration
of approximately $67.0 million. One of the properties was acquired in February 2017 from an unrelated party for $9.8
million. The Company has not yet determined the assignment of the purchase price of this facility to the individual assets
acquired. This acquisition was funded with a draw on the Company’s revolving line of credit. The following is a summary of
the properties under contract at December 31, 2016 (dollars in thousands).
State
Illinois*..........................................................................................
North Carolina* .............................................................................
Texas*............................................................................................
No. of
Properties
1
1
3
5
Contract
Amount
$ 9,800
12,425
44,800
$67,025
Acquisition
Date
Feb. 2017
* 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, 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 $11.6 million under these contracts in 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.
15. SUBSEQUENT EVENTS
On January 4, 2017, the Company declared a quarterly dividend of $0.95 per common share. The dividend was paid
on January 26, 2017 to shareholders of record on January 17, 2017. The total dividend paid amounted to $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.
80
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Controls and Procedures
Controls and Procedures (Parent Company)
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
The Parent Company’s management conducted an evaluation of the effectiveness of the design and operation of the
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 the
Parent Company’s management, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation,
the Parent Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the
Parent Company’s disclosure controls and procedures were effective at December 31, 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, 2016.
Management’s Report on Life Storage, Inc. Internal Control Over Financial Reporting
Management 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, 2016. 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. The 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 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 REIT are being made only in accordance with authorizations
of management and directors of the REIT; and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the REIT’s assets that could have a material effect on the financial statements.
The REIT’s management performed an assessment of the effectiveness of the REIT’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 REIT’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 REIT’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/ David L. Rogers
Chief Executive Officer
/S/ Andrew J. Gregoire
Chief Financial Officer
81
The Board of Directors and Shareholders of Life Storage, Inc.
Report of Independent Registered Public Accounting Firm
We have audited 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) (the COSO criteria). Life 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, Life Storage, Inc. maintained, in all material respects, effective internal control over financial
reporting as of December 31, 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 Life Storage, Inc. as of December 31, 2016 and 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, 2016 of Life Storage, Inc. and our report dated February 27, 2017 expressed an unqualified opinion
thereon.
/s/ Ernst & Young LLP
Buffalo, New York
February 27, 2017
82
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/ David L. Rogers
Chief Executive Officer
/S/ Andrew J. Gregoire
Chief Financial Officer
83
The Board of Directors and Partners of Life Storage LP
Report of Independent Registered Public Accounting Firm
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 criteria.
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
84
Item 9B.
Other Information
None.
Item 10.
Directors, Executive Officers and Corporate Governance
Part III
The information contained in the Parent Company’s Proxy Statement for the 2017 Annual Meeting of Shareholders
to be filed with the SEC within 120 days of the fiscal year ended December 31, 2016 (“2017 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.lifestorage.com.
Item 11.
Executive Compensation
The information required is incorporated by reference to "Executive Compensation" and "Director Compensation"
in the 2017 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 2017 Proxy Statement and is incorporated herein by
reference.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required herein is incorporated by reference to "Certain Transactions” and “Election of Directors—
Director Independence” in the 2017 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 2017 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:
Part IV
1.
The following consolidated financial statements of Life Storage, Inc. are included in Item 8.
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Consolidated Balance Sheets as of December 31, 2016 and 2015.
Consolidated Statements of Operations for Years Ended December 31, 2016, 2015, and 2014.
Consolidated Statements of Comprehensive Income for Years Ended December 31, 2016, 2015, and 2014.
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2016, 2015, and 2014.
Consolidated Statements of Cash Flows for Years Ended December 31, 2016, 2015, and 2014 and
Notes to Consolidated Financial Statements.
85
The following consolidated financial statements of Life Storage LP are included in Item 8.
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Consolidated Balance Sheets as of December 31, 2016 and 2015.
Consolidated Statements of Operations for Years Ended December 31, 2016, 2015, and 2014.
Consolidated Statements of Comprehensive Income for Years Ended December 31, 2016, 2015, and 2014.
Consolidated Statements of Partners’ Capital for the Years Ended December 31, 2016, 2015, and 2014.
Consolidated Statements of Cash Flows for Years Ended December 31, 2016, 2015, and 2014 and
Notes to Consolidated Financial Statements.
2.
The following financial statement Schedule as of the period ended December 31, 2016 is included in this Annual
Report on Form 10-K.
Schedule III Real Estate and Accumulated Depreciation at December 31, 2016.
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
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
The exhibits required to be filed as part of this Annual Report on Form 10-K have been included as follows:
Amended and Restated Articles of Incorporation of the Parent Company (incorporated by reference to
Exhibit 3.1 (a) to the Parent Company’s Registration Statement on Form S-11 (File No. 33-91422) filed June
19, 1995).
Articles Supplementary to the Amended and Restated Articles of Incorporation of the Parent Company
classifying and designating the Series A Junior Participating Cumulative Preferred Stock (incorporated by
reference to Exhibit 3.1 to the Parent Company’s Form 8-A filed December 3, 1996).
Articles Supplementary to the Amended and Restated Articles of Incorporation of the Parent Company
classifying and designating the 9.85% Series B Cumulative Redeemable Preferred Stock (incorporated by
reference to Exhibit 1.6 to the Parent Company's Form 8-A filed July 29, 1999).
Articles Supplementary to the Amended and Restated Articles of Incorporation of the Parent Company
classifying and designating the 8.375% Series C Convertible Cumulative Preferred Stock (incorporated by
reference to Exhibit 4.1 to the Parent Company’s Current Report on Form 8-K filed July 12, 2002).
Articles Supplementary to the Amended and Restated Articles of Incorporation of the Parent Company
reclassifying shares of Series B Cumulative Redeemable Preferred Stock into Preferred Stock. (incorporated
by reference to Exhibit 3.1 to the Parent Company's Current Report on Form 8-K filed May 31, 2011).
Articles of Amendment of the Parent Company (incorporated by reference to Exhibit 3.1 to the Parent
Company and the Operating Partnership’s Current Report on Form 8-K filed August 11, 2016).
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).
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).
Agreement of Limited Partnership of the Operating Partnership (incorporated by reference to Exhibit 3.1 on
Form 10 filed April 22, 1998).
86
3.10
3.11
4.1
4.2
4.3
4.4
4.5
Amendments to the Agreement of Limited Partnership of the Operation Partnership dated July 30, 1999 and
July 3, 2002 (incorporated by reference to Exhibit 10.13 to the Parent Company's Annual Report on Form
10-K filed February 27, 2009).
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).
Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Parent Company’s
Registration Statement on 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).
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).
Form of Guarantee (included in Exhibit 4.4).
10.1*+
2015 Award and Option Plan, as amended.
10.2+
10.3+
10.4+
10.5*+
10.6+
10.7+
10.8*+
10.9+
10.10+
2005 Award and Option Plan, as amended (incorporated by reference to Exhibit 10.1 to Parent Company’s
Report on Form 10-K filed February 28, 2012).
Employment Agreement between the Parent Company, the Operating Partnership, and Robert J. Attea
(incorporated by reference to Exhibit 10.3 to the Parent Company’s Annual Report on Form 10-K filed
February 27, 2009).
Amendment to Employment Agreement between the Parent Company, the Operating Partnership and
Robert J. Attea (incorporated by reference to Exhibit 10.1 to the Parent Company’s Current Report on Form
8-K filed January 21, 2015).
Amendment to Employment Agreement between the Parent Company, the Operating Partnership and
Robert J Attea.
Employment Agreement between the Parent Company, the Operating Partnership, and Kenneth F. Myszka
(incorporated by reference to Exhibit 10.4 to the Parent Company’s Annual Report on Form 10-K filed
February 27, 2009).
Amendment to Employment Agreement between the Parent Company, the Operating Partnership, and
Kenneth F. Myszka (incorporated by reference to Exhibit 10.2 to the Parent Company’s Current Report on
Form 8-K filed January 21, 2015).
Amendment to Employment Agreement between the Parent Company, the Operating Partnership and
Kenneth J. Myszka.
Employment Agreement between the Parent Company, the Operating Partnership, and David L. Rogers
(incorporated by reference to Exhibit 10.5 to the Parent Company’s Annual Report on Form 10-K filed
February 27, 2009).
Amendment to Employment Agreement between the Parent Company, the Operating Partnership and David
L. Rogers (incorporated by reference to Exhibit 10.3 to the Parent Company’s Current Report on Form 8-K
filed January 21, 2015).
87
10.11*+
Amendment to Employment Agreement between the Parent Company, the Operating Partnership and David
L. Rogers.
10.12+
10.13+
10.14+
10.15+
10.16+
10.17
10.18
10.19
10.20
10.21
10.22
Form of restricted stock grant pursuant to the 2005 Award and Option Plan (incorporated by reference to
Exhibit 10.6 to the Parent Company’s Report on Form 10-K filed February 28, 2012).
Form of stock option grant pursuant to 2005 Award and Option Plan (incorporated by reference to Exhibit
10.7 to the Parent Company’s Report on Form 10-K filed February 28, 2012).
Form of Long Term Incentive Restricted Stock Award Notice pursuant to the 2005 Award and Option Plan
(incorporated by reference to Exhibit 10.1 to the Parent Company’s Current Report on Form 8-K filed
December 19, 2013).
Form of Performance-Based Vesting Restricted Stock Award Notice pursuant to the 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 19, 2013).
Deferred Compensation Plan for Directors (incorporated by reference to the Parent Company’s
Schedule 14A Proxy Statement filed April 8, 2015).
Amended Indemnification Agreements with members of the Board of Directors and Executive Officers
(incorporated by reference to Exhibit 10.35 and 10.36 to the Parent Company’s Current Report on Form 8-
Sixth Amended and Restated Revolving Credit and Term Loan Agreement dated as of December 10, 2014
among the Parent Company, the Operating Partnership, Wells Fargo Bank, National Association,
Manufacturers and Traders Trust Company and certain other lenders a party thereto or which may become a
party thereto (collectively, the "Lenders"), Manufacturers and Traders Trust Company, as administrative
agent for itself and the other Lenders, Wells Fargo Bank, National Association, as syndication agent, and
U.S. Bank National Association, HSBC Bank USA, National Association, PNC Bank, National
Association, and SunTrust Bank as co-documentation agents, for themselves and the other Lenders
(incorporated by reference to Exhibit 10.1 to the Parent Company’s Current Report on Form 8-K filed
December 15, 2014).
Agreement Regarding Revolving Credit Commitment Increases and First 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).
Note Purchase Agreement dated as of August 5, 2011 among the Parent Company, the Operating
Partnership and the institutions named in Schedule A thereto as purchasers of $100 million, 5.54% Senior
Guaranteed Notes, Series D due August 5, 2021 (incorporated by reference to Exhibit 10.2 to the Parent
Company’s Current Report on Form 8-K filed August 8, 2011).
Note Purchase Agreement dated as of April 8, 2014 among the Parent Company, the Operating Partnership
and the institutions named in Schedule A thereto as purchasers of $175 million, 4.533% Senior Guaranteed
Notes, Series E due April 8, 2024 (incorporated by reference to Exhibit 10.1 to the Parent Company’s
Current Report on Form 8-K filed April 9, 2014).
Amendment No. 2 to Note Purchase Agreement (2011) dated June 29, 2016 by and among the Parent
Company, and the Operating Partnership and the Required Holders (incorporated by reference to
Exhibit 10.1 to the Parent Company and the Operating Partnership’s Current Report on Form 8-K filed
July 6, 2016).
88
10.23
Amendment No. 2 to Note Purchase Agreement (2014) dated June 29, 2016 by and among the Parent
Company and the Operating Partnership and the Required Holders (incorporated by reference to
Exhibit 10.2 to the Parent Company and the Operating Partnership’s Current Report on Form 8-K filed
July 6, 2016).
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31+
10.32+
10.33+
10.34+
Note Purchase Agreement dated as of July 21, 2016 among the Parent Company and the Operating
Partnership and the institutions named in Schedule A thereto as purchasers (incorporated by reference to
Exhibit 10.1 to the Parent Company and the Operating Partnership’s Current Report on Form 8-K filed
July 26, 2016).
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 Wells Fargo
Securities, LLC, as agent (incorporated by reference to Exhibit 1.1 to the Parent Company’s Current
Report on Form 8-K filed May 12, 2014).
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).
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 SunTrust Robinson
Humphrey, as agent (incorporated by reference to Exhibit 1.3 to the Parent Company’s Current Report on
Form 8-K filed May 12, 2014).
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 Piper Jaffray & Co.,
as agent (incorporated by reference to Exhibit 1.4 to the Parent Company’s Current Report on Form 8-K
filed May 12, 2014).
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 HSBC Securities
(USA) Inc., as agent (incorporated by reference to Exhibit 1.5 to the Parent Company’s Current Report on
Form 8-K filed May 12, 2014).
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 BB&T Capital
Markets, a division of BB&T Securities, LLC, as agent (incorporated by reference to Exhibit 1.6 to the
Parent Company’s Current Report on Form 8-K filed May 12, 2014).
2009 Outside Directors Stock Option and Award Plan, as amended (incorporated by reference to
Exhibit 10.2 to the Parent Company’s Current Report on Form 8-K filed April 6, 2016).
Outside Director Fee Schedule (incorporated by reference to Exhibit 10.1 to the Parent Company’s Current
Report on Form 8-K filed April 6, 2016).
Annual Incentive Compensation Plan for Executive Officers (incorporated by reference to Exhibit 10.1 to
the Parent Company’s Current Report on Form 8-K filed February 21, 2012).
Employment Agreement between the Parent Company, the Operating Partnership and Andrew Gregoire
amended and restated effective January 1, 2009 (incorporated by reference to Exhibit 10.1 to the Parent
Company’s Current Report on Form 8-K filed February 14, 2012).
89
10.35+
10.36+
10.37
10.38
10.39
10.40+
10.41+
10.42+
10.43+
10.44
10.45
10.46
12.1*
21.1*
23.1*
23.2*
24.1*
31.1*
Employment Agreement between the Parent Company, the Operating Partnership and Paul Powell amended
and restated effective January 1, 2009 (incorporated by reference to Exhibit 10.2 to the Parent Company’s
Current Report on Form 8-K filed February 14, 2012).
Employment Agreement between the Parent Company, the Operating Partnership and Edward Killeen
amended and restated effective January 1, 2009 (incorporated by reference to Exhibit 10.3 to the Parent
Company’s Current Report on Form 8-K filed February 14, 2012).
Indemnification Agreement dated July 16, 2012 between the Parent Company, the Operating Partnership and
Stephen R. Rusmisel, a director of the Company (incorporated by reference to Exhibit 10.1 to the Parent
Company’s Current Report on Form 8-K filed July 17, 2012).
Indemnification Agreement dated January 30, 2015 between the Parent Company, the Operating Partnership
and Arthur L. Havener, Jr., a director of the Parent Company (incorporated by reference to Exhibit 10.1 to
the Parent Company’s Current Report on Form 8-K filed February 3, 2015).
Indemnification Agreement dated January 30, 2015 between the Parent Company, the Operating Partnership
and Mark G. Barberio, a director of the Parent Company (incorporated by reference to Exhibit 10.2 to the
Parent Company’s Current Report on Form 8-K filed February 3, 2015).
Form of Long Term Incentive Restricted Stock Award Notice pursuant to 2005 Award and Option Plan
(incorporated by reference to Exhibit 10.1 to the Parent Company’s Current Report on Form 8-K filed
December 29, 2014).
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).
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).
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).
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).
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).
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).
Statement Re: Computation of Earnings to Fixed Charges of Life Storage, Inc. and Life Storage LP
Subsidiaries of the Company.
Consent of Independent Registered Public Accounting Firm
Consent of Independent Registered Public Accounting Firm
Powers of Attorney (included on signature pages).
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.
90
31.2*
31.3*
31.4*
32.1*
32.2*
101*
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.
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 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.
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.
The following financial statements from the Life Storage, Inc.’s Annual Report on Form 10-K for the year
ended December 31, 2016, formatted in XBRL, as follows:
(i)
(ii)
(iii)
Consolidated Balance Sheets at December 31, 2016 and 2015;
Consolidated Statements of Operations for Years Ended December 31, 2016, 2015, and 2014;
Consolidated Statements of Comprehensive Income for Years Ended December 31, 2016, 2015, and
2014.
Consolidated Statements of Shareholders' Equity for Years Ended December 31, 2016, 2015, and
2014;
Consolidated Statements of Cash Flows for Years Ended December 31, 2016, 2015, and 2014; and
Notes to Consolidated Financial Statements
(iv)
(v)
(vi)
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)
(ii)
(iii)
Consolidated Balance Sheets at December 31, 2016 and 2015;
Consolidated Statements of Operations for Years Ended December 31, 2016, 2015, and 2014;
Consolidated Statements of Comprehensive Income for Years Ended December 31, 2016, 2015, and
2014.
Consolidated Statements of Partners’ Capital for Years Ended December 31, 2016, 2015, and 2014;
Consolidated Statements of Cash Flows for Years Ended December 31, 2016, 2015, and 2014; and
Notes to Consolidated Financial Statements
(iv)
(v)
(vi)
*
+
Filed herewith.
Management contract or compensatory plan or arrangement.
Item 16. Form 10-K Summary
Not applicable.
91
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.
SIGNATURES
February 27, 2017
February 27, 2017
LIFE STORAGE, INC.
By:
/s/ Andrew J. Gregoire
Andrew J. Gregoire
Chief Financial Officer
(Principal Accounting Officer)
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
/s/ Robert J. Attea
Robert J. Attea
/s/ Kenneth F. Myszka
Kenneth F. Myszka
/s/ David L. Rogers
David L. Rogers
/s/ Andrew J. Gregoire
Andrew J. Gregoire
/s/ Charles E. Lannon
Charles E. Lannon
/s/ Stephen R. Rusmisel
Stephen R. Rusmisel
/s/ Arthur L. Havener, Jr.
Arthur L. Havener, Jr.
/s/ Mark. G. Barberio
Mark G. Barberio
Title
Date
Executive Chairman and Director of Life
Storage, Inc. and Life Storage Holdings, Inc.,
general partner of Life Storage LP
February 27, 2017
President and Director of Life Storage, Inc. and February 27, 2017
Life Storage Holdings, Inc., general partner of
Life Storage LP
Chief Executive Officer (Principal Executive
Officer) of Life Storage, Inc. and Life Storage
Holdings, Inc., general partner of Life
Storage LP
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
February 27, 2017
Director of Life Storage, Inc.
February 27, 2017
Director of Life Storage, Inc.
February 27, 2017
Director of Life Storage, Inc.
February 27, 2017
Director of Life Storage, Inc.
February 27, 2017
92
Life Storage, Inc.
Schedule III
Combined Real Estate and Accumulated Depreciation
(in thousands)
December 31, 2016
Encum
brance
Description
Charleston
Lakeland
Charlotte
Youngstown
Cleveland
Pt. St. Lucie
Orlando - Deltona
NY Metro-Middletown
Buffalo
Rochester
Jacksonville
Columbia
Boston
Rochester
Boston
Savannah
Greensboro
Raleigh-Durham
Hartford-New Haven
Atlanta
Atlanta
Buffalo
Raleigh-Durham
Columbia
Columbia
Columbia
Atlanta
Orlando
Sharon
Ft. Lauderdale
West Palm
Atlanta
Atlanta
Atlanta
Atlanta
Atlanta
Baltimore
Baltimore
Melbourne
Newport News
Pensacola
Hartford
Atlanta
Alexandria
Pensacola
Melbourne
Hartford
Atlanta
Norfolk
Norfolk - Virginia Beach
Birmingham
Birmingham
Montgomery
Jacksonville
Pensacola
Pensacola
ST
SC
FL
NC
OH
OH
FL
FL
NY
NY
NY
FL
SC
MA
NY
MA
GA
NC
NC
CT
GA
GA
NY
NC
SC
SC
SC
GA
FL
PA
FL
FL
GA
GA
GA
GA
GA
MD
MD
FL
VA
FL
CT
GA
VA
FL
FL
CT
GA
VA
VA
AL
AL
AL
FL
FL
FL
Land
Initial Cost to Company
Building,
Equipment
and
Impvmts.
$1,516
1,424
1,102
1,110
1,659
1,501
1,752
808
1,531
1,404
728
1,248
1,679
847
1,616
1,684
1,613
2,329
1,402
2,021
1,103
745
1,150
1,331
719
1,188
1,579
1,930
912
3,619
1,035
1,015
1,166
1,116
786
999
555
1,742
2,104
1,471
2,962
1,695
1,118
3,220
901
2,066
861
1,244
1,462
4,998
1,415
1,725
2,041
1,515
1,358
1,128
$416
397
308
239
701
395
483
224
423
395
152
268
363
230
680
463
444
649
387
844
302
315
321
361
189
488
430
513
194
1,503
398
423
483
308
170
413
154
479
883
316
632
715
304
1,375
244
834
234
256
313
1,142
307
730
863
326
369
244
Cost
Capitalized
Subsequent
to
Acquisition
Building,
Equipment
and
Impvmts.
$2,350
1,696
3,508
2,531
3,808
1,063
2,287
1,080
3,477
661
3,898
777
854
2,323
874
4,937
3,209
1,446
3,971
972
684
4,039
861
924
1,192
2,097
2,323
813
572
1,233
502
574
1,253
794
856
808
1,473
2,978
2,026
1,016
1,649
1,383
2,820
2,836
658
3,483
3,486
2,231
2,657
3,411
1,922
2,981
1,415
1,368
3,194
2,819
Land
Total
Gross Amount at Which
Carried at Close of Period
Building,
Equipment
and
Impvmts.
$3,866
3,120
4,171
3,641
5,132
2,180
4,039
1,888
4,934
2,065
4,091
2,025
2,533
3,166
2,490
5,639
4,822
3,775
5,373
2,993
1,786
4,582
2,011
2,242
1,911
3,285
3,730
2,743
1,484
4,852
1,537
1,588
2,419
1,910
1,638
1,807
1,876
4,720
4,130
2,487
4,592
3,078
3,623
6,055
1,559
4,792
3,969
3,475
4,119
8,409
3,259
4,706
3,456
2,883
4,552
3,471
$416
397
747
239
1,036
779
483
224
497
395
687
268
363
234
680
1,445
444
649
387
844
303
517
321
374
189
488
602
513
194
1,503
398
424
483
308
174
413
306
479
883
316
651
715
619
1,376
244
1,591
612
256
313
1,142
385
730
863
326
369
720
$4,282
3,517
4,918
3,880
6,168
2,959
4,522
2,112
5,431
2,460
4,778
2,293
2,896
3,400
3,170
7,084
5,266
4,424
5,760
3,837
2,089
5,099
2,332
2,616
2,100
3,773
4,332
3,256
1,678
6,355
1,935
2,012
2,902
2,218
1,812
2,220
2,182
5,199
5,013
2,803
5,243
3,793
4,242
7,431
1,803
6,383
4,581
3,731
4,432
9,551
3,644
5,436
4,319
3,209
4,921
4,191
Accum.
Deprec.
$1,585
1,293
1,256
1,329
1,403
1,211
1,799
940
1,946
1,120
1,119
1,020
1,282
862
1,199
2,298
1,719
1,806
1,452
1,515
899
1,307
1,029
1,168
975
1,169
1,511
1,483
776
2,253
851
861
1,102
1,022
824
1,032
840
1,904
2,007
1,293
2,472
1,461
1,526
2,919
871
1,518
1,205
1,501
1,485
3,218
1,430
1,544
1,630
1,182
1,901
1,205
Date of
Const.
1985
1985
1986
1980
1987
1985
1984
1988
1981
1981
1985
1985
1980
1980
1986
1981
1986
1985
1985
1988
1988
1984
1985
1987
1989
1986
1988
1988
1975
1985
1985
1989
1988
1986
1981
1975
1984
1988
1986
1988
1983
1988
1988
1984
1986
1986
1992
1988
1984
1989/93/95
1990
1990
1982
1987
1986
1990
Date
Acquired
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
Life on which
depreciation
in latest
income
statement
is completed
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
93
Encum
brance
Description
Pensacola
Tampa
Clearwater
Clearwater-Largo
Jackson
Jackson
Providence
Richmond
Orlando
Syracuse
Ft. Myers
Ft. Myers
Harrisburg
Harrisburg
Newport News
Montgomery
Charleston
Tampa
Dallas-Ft.Worth
Dallas-Ft.Worth
Dallas-Ft.Worth
San Antonio
San Antonio
Montgomery
West Palm
Ft. Myers
Syracuse
Lakeland
Boston - Springfield
Ft. Myers
Cincinnati
Baltimore
Jacksonville
Jacksonville
Jacksonville
Charlotte
Charlotte
Orlando
Rochester
Youngstown
Cleveland
Cleveland
Cleveland
Cleveland
Cleveland
Cleveland
Cleveland
San Antonio
San Antonio
San Antonio
Houston-Beaumont
Houston-Beaumont
Houston-Beaumont
Chesapeake
Orlando-W 25th St
Delray
Savannah
Delray
Cleveland-Avon
Dallas-Fort Worth
Atlanta-Alpharetta
Atlanta-Marietta
Atlanta-Doraville
ST
FL
FL
FL
FL
MS
MS
RI
VA
FL
NY
FL
FL
PA
PA
VA
AL
SC
FL
TX
TX
TX
TX
TX
AL
FL
FL
NY
FL
MA
FL
OH
MD
FL
FL
FL
NC
NC
FL
NY
OH
OH
OH
OH
OH
OH
OH
OH
TX
TX
TX
TX
TX
TX
VA
FL
FL
GA
FL
OH
TX
GA
GA
GA
Land
Initial Cost to Company
Building,
Equipment
and
Impvmts.
1,046
2,597
1,958
2,439
1,580
964
1,268
1,602
2,755
1,712
912
1,703
1,641
2,224
1,592
1,299
858
1,800
1,767
1,662
1,324
1,759
1,161
1,014
1,262
884
1,559
1,287
917
1,254
1,988
2,770
2,028
1,635
2,033
1,754
1,131
1,113
2,496
2,142
2,676
2,586
2,918
1,781
2,714
1,921
2,164
1,686
1,236
1,560
2,565
2,279
1,357
1,043
1,160
1,756
1,196
3,282
1,214
3,864
3,753
2,788
3,429
226
1,088
526
672
343
209
345
443
1,161
470
205
412
360
627
442
353
237
766
442
408
328
436
289
279
345
229
481
359
251
344
557
777
568
436
535
487
315
314
704
600
751
725
637
495
761
418
606
474
346
432
634
566
293
260
289
491
296
921
301
965
1,033
769
735
Cost
Capitalized
Subsequent
to
Acquisition
Building,
Equipment
and
Impvmts.
784
1,160
1,545
900
2,612
870
2,081
1,104
2,155
1,512
553
763
711
3,872
1,422
1,094
983
772
454
1,284
431
1,518
2,453
1,476
667
2,864
2,643
1,291
2,530
654
977
798
1,366
920
603
683
508
1,296
2,851
2,574
4,405
2,332
2,052
1,386
1,734
2,934
1,523
688
576
2,101
4,380
570
707
4,720
2,467
778
590
795
2,302
1,728
720
642
496
Land
Total
Gross Amount at Which
Carried at Close of Period
Building,
Equipment
and
Impvmts.
1,830
3,757
3,503
3,339
3,739
1,834
3,208
2,706
4,909
3,222
1,464
2,465
2,352
6,031
3,014
2,393
1,833
2,572
2,221
2,946
1,755
3,277
3,614
2,336
1,929
3,594
4,012
2,578
3,401
1,942
2,834
3,568
3,394
2,555
2,633
2,437
1,639
2,409
5,344
4,623
7,081
4,918
4,906
3,167
4,448
4,855
3,687
2,344
1,812
3,661
6,945
2,849
2,064
5,763
3,300
2,534
1,786
4,077
3,513
5,614
4,473
3,374
3,925
226
1,088
526
672
796
209
486
443
1,162
472
206
413
360
692
442
353
245
766
442
408
328
436
289
433
345
383
671
359
297
310
688
777
568
436
538
487
315
314
707
693
751
725
701
495
761
418
606
504
346
432
634
566
293
260
616
491
296
921
304
943
1,033
825
735
2,056
4,845
4,029
4,011
4,535
2,043
3,694
3,149
6,071
3,694
1,670
2,878
2,712
6,723
3,456
2,746
2,078
3,338
2,663
3,354
2,083
3,713
3,903
2,769
2,274
3,977
4,683
2,937
3,698
2,252
3,522
4,345
3,962
2,991
3,171
2,924
1,954
2,723
6,051
5,316
7,832
5,643
5,607
3,662
5,209
5,273
4,293
2,848
2,158
4,093
7,579
3,415
2,357
6,023
3,916
3,025
2,082
4,998
3,817
6,557
5,506
4,199
4,660
Life on which
depreciation
in latest
income
statement
is completed
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
Date
Acquired
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
6/26/1995
8/25/1995
9/29/1995
12/27/1995
12/28/1995
12/28/1995
12/29/1995
12/29/1995
1/5/1996
1/23/1996
3/1/1996
3/28/1996
3/29/1996
3/29/1996
3/29/1996
3/29/1996
3/29/1996
5/21/1996
5/29/1996
5/29/1996
6/5/1996
6/26/1996
6/28/1996
6/28/1996
7/23/1996
7/26/1996
8/23/1996
8/26/1996
8/30/1996
9/16/1996
9/16/1996
10/30/1996
12/20/1996
1/10/1997
1/10/1997
1/10/1997
1/10/1997
1/10/1997
1/10/1997
1/10/1997
1/10/1997
1/30/1997
1/30/1997
1/30/1997
3/26/1997
3/26/1997
3/26/1997
3/31/1997
3/31/1997
4/11/1997
5/8/1997
5/21/1997
6/4/1997
6/30/1997
7/24/1997
7/24/1997
8/21/1997
Date of
Const.
1990
1989
1985
1988
1990
1990
1984
1987
1986
1987
1988
1991/94
1983
1985
1988/93
1984
1985
1985
1987
1986
1986
1986
2012
1988
1986
1986
1983
1988
1986
1987
1988
1990
1987
1985
1987/92
1995
1995
1975
1990
1988
1986
1978
1979
1979
1977
1970
1982
1981
1985
1995
1993/95
1995
1995
1988/95
1984
1969
1988
1980
1989
1977
1994
1996
1995
Accum.
Deprec.
996
2,121
1,660
1,757
1,475
978
1,185
1,383
2,173
1,534
813
1,420
1,308
2,068
1,408
1,042
893
1,324
1,146
1,416
922
1,499
362
1,001
891
875
1,771
1,318
1,567
996
894
1,758
1,713
1,255
1,422
1,198
845
1,155
1,987
1,745
2,404
2,152
2,610
1,480
2,201
1,959
1,614
1,049
865
1,632
1,940
1,400
947
1,491
948
1,321
875
2,021
1,438
2,652
2,186
1,641
1,962
94
Encum
brance
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
ST
NC
NC
LA
LA
PA
FL
NY
VA
VA
VA
VA
MA
NC
FL
MA
RI
TN
TN
GA
AL
NH
NC
NC
OH
OH
MS
TX
FL
FL
TX
TX
TX
TX
TX
TX
FL
FL
FL
FL
FL
TX
TX
OH
MS
TX
RI
LA
LA
LA
LA
LA
AZ
AZ
AZ
AZ
AZ
AZ
AZ
AZ
AZ
ME
FL
TX
Land
Initial Cost to Company
Building,
Equipment
and
Impvmts.
1,097
376
1,831
1,303
2,550
3,235
3,394
2,210
2,532
2,211
5,019
1,788
1,834
1,990
2,941
2,821
1,371
1,198
1,250
1,942
2,977
3,103
3,763
1,864
1,829
3,021
1,524
2,654
1,813
1,790
2,302
1,988
1,493
1,995
1,951
4,854
3,803
3,643
6,059
3,373
1,998
2,407
1,570
1,642
2,058
1,776
1,951
2,860
1,095
652
3,896
2,600
2,596
1,309
1,346
1,026
1,405
1,610
3,476
3,401
1,626
2,373
1,521
268
89
396
282
635
709
843
542
620
540
1,243
441
397
492
733
702
384
296
349
544
742
775
940
522
512
744
419
662
489
447
635
548
324
492
484
1,208
944
903
1,503
840
550
670
390
460
507
447
556
708
314
188
963
651
565
330
339
291
354
453
872
849
410
667
335
Cost
Capitalized
Subsequent
to
Acquisition
Building,
Equipment
and
Impvmts.
859
1,854
1,161
504
731
979
1,038
527
1,289
508
990
1,120
964
1,282
1,676
4,243
623
2,358
1,834
1,311
649
940
979
1,393
2,765
288
4,064
3,704
1,768
2,587
371
423
2,204
2,631
724
700
795
592
-1,853
642
850
1,761
1,462
765
1,812
1,023
1,288
1,320
954
1,674
1,136
1,313
769
2,586
740
1,143
594
1,095
3,618
955
2,024
1,014
853
Land
Total
Gross Amount at Which
Carried at Close of Period
Building,
Equipment
and
Impvmts.
1,993
2,230
2,967
1,807
3,279
4,214
4,432
2,737
3,821
2,719
6,009
2,655
2,798
3,076
4,617
7,064
1,994
3,438
2,969
3,253
3,626
4,043
4,742
3,210
4,473
3,309
5,588
6,358
3,486
4,084
2,673
2,411
3,697
4,608
2,678
5,554
4,598
4,235
4,858
4,015
2,848
4,168
3,032
2,407
3,870
2,799
3,239
4,180
2,049
2,326
5,032
3,792
3,365
3,492
2,086
2,169
1,999
2,705
7,094
4,356
3,650
3,387
2,374
231
89
421
282
637
709
843
542
620
540
1,243
694
397
688
733
702
384
414
464
544
742
775
940
569
633
744
419
662
584
740
635
548
324
510
481
1,208
944
903
851
840
550
670
390
460
507
447
556
708
314
188
963
772
565
733
339
291
354
453
872
849
410
667
335
2,224
2,319
3,388
2,089
3,916
4,923
5,275
3,279
4,441
3,259
7,252
3,349
3,195
3,764
5,350
7,766
2,378
3,852
3,433
3,797
4,368
4,818
5,682
3,779
5,106
4,053
6,007
7,020
4,070
4,824
3,308
2,959
4,021
5,118
3,159
6,762
5,542
5,138
5,709
4,855
3,398
4,838
3,422
2,867
4,377
3,246
3,795
4,888
2,363
2,514
5,995
4,564
3,930
4,225
2,425
2,460
2,353
3,158
7,966
5,205
4,060
4,054
2,709
Life on which
depreciation
in latest
income
statement
is completed
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
Date
Acquired
9/25/1997
9/25/1997
10/9/1997
11/21/1997
12/3/1997
2/4/1998
2/4/1998
2/5/1998
2/5/1998
2/5/1998
2/5/1998
2/9/1998
2/10/1998
2/25/1998
3/3/1998
3/26/1998
3/27/1998
3/27/1998
3/27/1998
3/27/1998
4/7/1998
4/9/1998
4/9/1998
4/22/1998
4/22/1998
5/13/1998
5/20/1998
6/2/1998
6/12/1998
6/16/1998
6/19/1998
6/19/1998
6/30/1998
6/30/1998
6/30/1998
7/1/1998
7/1/1998
7/1/1998
7/1/1998
8/3/1998
9/29/1998
10/9/1998
11/19/1998
12/1/1998
12/15/1998
2/2/1999
2/17/1999
2/17/1999
2/17/1999
2/17/1999
2/17/1999
5/18/1999
5/18/1999
5/18/1999
5/18/1999
5/18/1999
5/18/1999
5/18/1999
5/18/1999
5/21/1999
8/2/1999
9/29/1999
11/9/1999
Date of
Const.
1995
1997
1982
1985
1984
1985
1989/95
1996
1995
1991
1975
1988
1993
1986/90
1979
1984/88
1987
1985
1989
1984
1980
1988/91
1990/96
1986
1986
1995
1994
1985
1997
1986
1997
1997
1994
1994
1996
1988
1985
1988
1991
1987
1996
1996
1988
1984
1993
1986/94
1980
1992/94
1975
1977
1994
1995
1997
1986
1986
1976
1986
1984
1984
1996
1988
1982
1985
Accum.
Deprec.
814
941
1,382
894
1,626
2,041
2,047
1,304
1,727
1,300
2,862
813
1,241
953
2,186
2,310
1,018
1,293
1,061
1,555
1,679
1,904
2,235
1,454
1,561
1,575
1,613
1,558
1,136
1,523
1,200
1,097
1,345
1,509
1,184
2,620
2,182
1,978
2,298
1,913
1,199
1,690
1,136
1,151
1,455
1,268
1,606
1,591
1,055
1,073
2,108
1,600
1,472
1,173
882
835
911
1,211
2,354
1,932
1,435
1,514
921
95
Encum
brance
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
San Marcos-Hwy 35S
Houston-Baytown
Houston-Cypress
Rochester
Houston-Jones Rd 2
Lafayette
Lafayette
Lafayette
ST
NY
MA
TX
FL
AL
NY
TX
TX
FL
MA
MA
SC
SC
ME
MA
MA
NY
TX
TX
TX
TX
TX
TX
TX
TX
TX
NY
NY
NY
NY
TX
TX
CT
TX
TX
TX
TX
TX
FL
TX
TN
TX
NY
NY
MA
CT
AL
TX
MA
TX
TX
TX
TX
GA
LA
TX
TX
TX
NY
TX
LA
LA
LA
Land
Initial Cost to Company
Building,
Equipment
and
Impvmts.
1,312
2,573
2,617
1,422
1,059
6,920
2,977
3,392
3,249
3,737
3,649
3,139
1,970
1,914
4,584
3,060
1,203
2,956
1,595
1,545
3,696
2,468
3,159
3,286
1,650
3,287
8,866
4,564
2,918
5,744
4,201
3,776
11,013
3,170
4,877
4,550
4,427
1,640
6,986
4,744
5,569
5,857
4,609
2,121
2,501
6,585
7,726
4,949
1,902
2,183
2,265
3,065
1,977
3,397
2,927
2,532
2,411
2,994
3,779
2,933
1,621
1,831
2,406
276
633
633
384
254
1,716
837
733
787
1,035
1,024
883
552
534
1,004
670
294
734
394
381
919
612
689
817
407
817
2,207
1,131
635
1,251
1,039
827
2,713
773
1,195
1,103
1,061
388
1,720
1,167
1,365
2,047
1,131
527
612
1,612
1,906
1,214
470
537
556
754
484
811
719
628
596
721
937
707
411
463
601
Cost
Capitalized
Subsequent
to
Acquisition
Building,
Equipment
and
Impvmts.
1,314
1,055
476
842
2,066
1,754
3,579
900
750
743
827
1,473
1,155
511
2,370
611
1,194
822
499
3,979
702
463
795
2,190
327
499
830
608
447
543
258
509
595
1,876
435
512
2,910
1,046
315
3,576
1,845
880
252
3,273
368
289
389
363
1,668
-320
549
259
1,544
580
2,568
3,288
287
2,318
228
2,831
281
208
1,442
Land
Total
Gross Amount at Which
Carried at Close of Period
Building,
Equipment
and
Impvmts.
2,626
3,628
3,093
2,264
3,047
8,409
6,427
4,184
3,884
4,411
4,409
4,553
3,088
2,389
6,954
3,627
2,364
3,728
2,067
5,287
4,398
2,931
3,954
5,174
1,977
3,786
9,696
5,172
3,365
6,287
4,459
4,285
11,608
5,046
5,312
5,062
7,337
2,686
7,301
7,921
7,414
6,808
4,861
5,394
2,869
6,874
8,115
5,311
3,570
1,909
2,814
3,324
3,521
3,977
5,495
5,466
2,698
5,312
4,007
5,764
1,902
2,039
3,848
276
633
633
384
332
1,981
966
841
902
1,104
1,091
942
589
570
1,004
714
327
784
421
618
919
612
689
1,119
407
817
2,207
1,131
635
1,251
1,039
827
2,713
773
1,195
1,103
1,061
388
1,720
1,566
1,365
1,976
1,131
527
612
1,612
1,906
1,215
470
491
556
754
484
811
719
982
596
721
937
707
411
463
601
2,902
4,261
3,726
2,648
3,379
10,390
7,393
5,025
4,786
5,515
5,500
5,495
3,677
2,959
7,958
4,341
2,691
4,512
2,488
5,905
5,317
3,543
4,643
6,293
2,384
4,603
11,903
6,303
4,000
7,538
5,498
5,112
14,321
5,819
6,507
6,165
8,398
3,074
9,021
9,487
8,779
8,784
5,992
5,921
3,481
8,486
10,021
6,526
4,040
2,400
3,370
4,078
4,005
4,788
6,214
6,448
3,294
6,033
4,944
6,471
2,313
2,502
4,449
Life on which
depreciation
in latest
income
statement
is completed
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
Date
Acquired
2/2/2000
2/15/2000
3/1/2000
5/2/2000
11/15/2000
12/27/2000
2/22/2001
3/2/2001
3/13/2001
12/1/2001
12/1/2001
12/1/2001
12/1/2001
12/3/2001
12/19/2001
12/19/2001
2/5/2002
2/13/2002
2/13/2002
2/13/2002
6/19/2002
6/19/2002
6/19/2002
6/19/2002
6/19/2002
6/19/2002
12/16/2002
12/16/2002
12/16/2002
12/16/2002
8/26/2003
10/1/2003
3/17/2004
5/19/2004
5/19/2004
5/19/2004
5/19/2004
5/19/2004
6/3/2004
6/23/2004
8/4/2004
8/5/2004
3/15/2005
3/16/2005
4/12/2005
4/14/2005
6/1/2005
6/6/2005
6/23/2005
7/12/2005
7/12/2005
7/12/2005
7/12/2005
9/15/2005
11/15/2005
1/10/2006
1/10/2006
1/13/2006
2/1/2006
3/9/2006
4/13/2006
4/13/2006
4/13/2006
Date of
Const.
1998
1989
1996
1994
1998
1991/97
1996/99
1993/97
1997
1986
1984
1985
1984
1988
1996
1984
1987
1984
1985
1980
1998/02
1999
1994/97
1998
1997
1996
1989/95
1998
1997
1994/98
1995/99
1998/01
1998
2000
2001
2001
2003
2003
2001
1998
1998/02
2000
2003
1988/02
1965/75
2002
1997
1997/99
2002
2003
2003
2003
2002/04
2003
1984/94
2001
2002
2003
2002/06
2000
1997
2001/04
2002
Accum.
Deprec.
1,010
1,458
1,351
897
906
2,108
1,271
1,300
1,254
1,743
1,675
1,624
1,192
908
2,292
1,363
774
1,379
763
1,185
1,562
1,053
1,336
1,696
723
1,418
3,497
1,823
1,193
2,198
1,517
1,422
3,920
1,590
1,664
1,684
2,191
801
2,366
2,176
2,388
2,181
1,492
1,014
859
2,166
2,450
1,592
1,008
638
866
1,028
957
1,224
1,291
773
735
1,303
1,151
1,506
592
616
1,071
96
Encum
brance
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
Pensacola 6-Nine Mile
Auburn-College St
Biloxi-Gulfport
Pensacola 7-Hwy 98
Montgomery-Arrowhead
Montgomery-McLemore
Houston-Beaumont
Hattiesburg-Classic
Biloxi-Ginger
Foley-7905 St Hwy 59
ST
LA
NH
FL
FL
FL
LA
MO
MO
MO
MO
MO
MO
MO
TX
TX
TX
TX
TX
TX
TX
TX
TX
NH
LA
TN
AL
AL
AL
GA
GA
GA
GA
NH
TX
TX
NY
NY
NY
NY
NY
NY
NY
NY
NY
TX
AL
AL
MS
AL
AL
MS
AL
AL
FL
AL
MS
FL
AL
AL
TX
MS
MS
AL
Land
Initial Cost to Company
Building,
Equipment
and
Impvmts.
1,319
3,268
5,037
3,676
2,739
4,805
4,359
3,040
3,290
2,867
3,596
3,552
2,711
4,946
2,434
2,428
4,276
2,180
2,542
3,836
3,060
4,624
2,422
2,784
2,471
4,639
2,361
2,758
2,905
3,854
3,680
1,745
3,213
3,647
6,018
2,119
1,794
2,531
1,344
1,331
2,185
3,827
1,498
4,002
2,685
6,338
4,013
5,624
4,775
4,819
5,325
4,624
5,474
4,180
2,732
7,152
3,015
4,333
3,586
3,024
1,799
1,548
1,757
542
832
1,270
929
696
1,220
1,113
766
828
734
899
890
697
1,256
605
607
1,073
549
644
963
773
1,175
617
699
619
1,158
590
694
736
975
0
439
813
929
1,537
532
437
638
348
323
315
961
375
1,003
676
1,607
1,016
1,423
1,206
1,216
1,345
1,164
1,346
1,029
686
1,811
732
1,075
885
742
444
384
437
Cost
Capitalized
Subsequent
to
Acquisition
Building,
Equipment
and
Impvmts.
2,210
185
376
339
240
316
378
1,504
206
2,503
324
473
225
475
197
219
98
1,148
136
222
2,012
365
587
3,809
169
1,032
599
344
330
1,383
324
321
2,041
233
611
3,492
702
2,939
474
249
1,143
2,637
649
144
431
1,085
454
197
365
359
120
297
1,575
194
242
140
82
302
253
246
228
139
207
Land
Total
Gross Amount at Which
Carried at Close of Period
Building,
Equipment
and
Impvmts.
3,529
3,453
5,413
4,015
2,979
5,121
4,737
4,544
3,496
5,370
3,920
4,025
2,936
5,421
2,631
2,647
4,374
3,328
2,678
4,058
5,072
4,989
3,009
6,593
2,640
5,671
2,960
3,102
3,235
5,237
4,004
2,066
5,254
3,879
6,629
5,611
2,496
5,470
1,818
1,580
3,327
6,464
2,147
4,146
3,116
7,353
4,466
5,821
5,140
5,178
5,489
4,921
7,049
4,374
2,974
7,292
3,097
4,635
3,839
3,270
2,027
1,687
1,964
542
832
1,270
929
696
1,220
1,113
766
828
734
899
890
697
1,256
605
607
1,073
549
644
963
773
1,175
617
699
619
1,158
590
694
736
975
0
439
813
930
1,537
532
437
638
348
323
316
961
375
1,003
676
1,677
1,017
1,423
1,206
1,216
1,301
1,164
1,346
1,029
686
1,811
732
1,075
885
742
444
384
437
4,071
4,285
6,683
4,944
3,675
6,341
5,850
5,310
4,324
6,104
4,819
4,915
3,633
6,677
3,236
3,254
5,447
3,877
3,322
5,021
5,845
6,164
3,626
7,292
3,259
6,829
3,550
3,796
3,971
6,212
4,004
2,505
6,067
4,809
8,166
6,143
2,933
6,108
2,166
1,903
3,643
7,425
2,522
5,149
3,792
9,030
5,483
7,244
6,346
6,394
6,790
6,085
8,395
5,403
3,660
9,103
3,829
5,710
4,724
4,012
2,471
2,071
2,401
Accum.
Deprec.
920
977
1,502
1,078
836
1,432
1,322
1,009
979
1,139
1,078
1,091
809
1,446
698
716
1,184
793
734
1,122
1,118
1,318
835
1,276
726
1,541
776
809
871
1,113
1,056
575
1,283
1,016
1,694
908
600
853
435
409
774
1,288
505
1,051
814
1,771
1,130
1,469
1,266
1,331
1,360
1,233
1,512
1,178
775
1,782
822
1,166
945
855
521
405
461
Date of
Const.
1997/99
2000
1998
2000
1999
2000
1999
1999
1999
1980/01
2000
1999
2000
1998/03
2004
2004
2003
1998
1999
2004
2000
1998
1989
1995/99
2002
1996/97
1998
2002/03
2002/04/06
1995
2004/05
1998
2000
2002/04
2003/06
1993/07
1998
1997
1998
1998
1999/00
1999
1990/95
1999
2003/06
1989/06
1993/07
1998/05
1998/06
2000/07
2002/04
2002/06
2003/06
2003/06
2003
2004/06
2006
2006
2006
2002/05
1998
2000
2000
Date
Acquired
4/13/2006
4/26/2006
6/22/2006
6/22/2006
6/22/2006
6/22/2006
6/22/2006
6/22/2006
6/22/2006
6/22/2006
6/22/2006
6/22/2006
6/22/2006
6/22/2006
6/22/2006
6/22/2006
6/22/2006
6/22/2006
6/22/2006
6/22/2006
6/22/2006
6/22/2006
6/29/2006
8/1/2006
8/7/2006
9/28/2006
9/28/2006
9/28/2006
9/28/2006
9/28/2006
9/28/2006
9/28/2006
10/31/2006
3/8/2007
3/8/2007
3/30/2007
3/30/2007
3/30/2007
3/30/2007
3/30/2007
3/30/2007
3/30/2007
3/30/2007
3/30/2007
5/21/2007
6/1/2007
6/1/2007
6/1/2007
6/1/2007
6/1/2007
6/1/2007
6/1/2007
6/1/2007
6/1/2007
6/1/2007
6/1/2007
6/1/2007
6/1/2007
6/1/2007
11/14/2007
12/19/2007
12/19/2007
12/19/2007
Life on which
depreciation
in latest
income
statement
is completed
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
97
Encum
brance
1,852
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
ST
MS
MS
OH
VA
NC
NC
NC
NC
NC
NC
NC
NJ
NJ
MO
GA
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
VA
FL
FL
IL
IL
VA
GA
FL
FL
FL
GA
GA
GA
GA
NC
IL
IL
AZ
IL
IL
IL
IL
FL
FL
FL
FL
Land
Initial Cost to Company
Building,
Equipment
and
Impvmts.
5,965
5,377
3,409
5,981
4,095
3,702
3,975
5,317
4,767
3,575
3,355
9,467
3,073
2,132
8,252
4,201
3,552
3,106
2,727
4,435
3,312
3,557
4,223
2,315
3,027
3,602
4,947
4,500
3,223
4,583
3,236
2,687
4,145
6,142
3,974
5,175
2,138
5,892
4,281
12,077
11,606
4,880
5,862
6,766
5,719
3,882
3,858
9,266
4,315
3,838
4,692
4,901
3,129
5,894
3,656
5,029
6,466
3,226
9,869
3,775
2,280
4,018
5,978
1,479
1,337
852
1,047
846
961
574
513
1,129
381
965
796
885
197
1,043
825
693
1,243
1,559
691
1,012
575
705
1,168
2,152
402
1,653
1,474
177
1,438
272
536
1,478
1,315
3,189
1,049
2,054
2,848
197
2,960
1,932
1,940
911
1,560
644
772
739
1,384
856
855
1,342
2,337
1,213
1,050
910
2,593
1,718
395
2,373
1,501
515
1,234
1,555
Cost
Capitalized
Subsequent
to
Acquisition
Building,
Equipment
and
Impvmts.
546
240
274
2,729
194
1,216
244
40
125
92
103
312
652
63
84
325
121
128
91
2,478
222
185
206
215
330
259
409
31
143
128
196
167
173
222
177
517
365
95
600
123
167
292
73
27
78
76
63
77
67
122
96
219
207
160
162
240
643
105
126
186
138
126
141
Land
Total
Gross Amount at Which
Carried at Close of Period
Building,
Equipment
and
Impvmts.
6,511
5,617
3,683
8,710
4,289
4,918
4,219
5,357
4,892
3,667
3,458
9,779
3,725
2,195
8,336
4,526
3,673
3,234
2,818
6,913
3,534
3,742
4,429
2,530
3,357
3,861
5,356
4,549
3,366
4,711
3,432
2,854
4,318
6,364
4,151
5,692
2,503
5,987
4,881
12,200
11,773
5,172
5,935
6,793
5,797
3,958
3,921
9,343
4,382
3,960
4,788
5,120
3,336
6,054
3,818
5,269
7,029
3,331
9,995
3,961
2,418
4,144
6,119
1,479
1,337
852
1,047
846
961
574
513
1,129
381
965
796
885
197
1,043
825
693
1,243
1,559
691
1,012
575
705
1,168
2,152
402
1,653
1,456
177
1,438
272
536
1,478
1,315
3,189
1,049
2,054
2,848
197
2,960
1,932
1,940
911
1,560
644
772
739
1,384
856
855
1,342
2,337
1,213
1,050
910
2,593
1,798
395
2,373
1,501
515
1,234
1,555
7,990
6,954
4,535
9,757
5,135
5,879
4,793
5,870
6,021
4,048
4,423
10,575
4,610
2,392
9,379
5,351
4,366
4,477
4,377
7,604
4,546
4,317
5,134
3,698
5,509
4,263
7,009
6,005
3,543
6,149
3,704
3,390
5,796
7,679
7,340
6,741
4,557
8,835
5,078
15,160
13,705
7,112
6,846
8,353
6,441
4,730
4,660
10,727
5,238
4,815
6,130
7,457
4,549
7,104
4,728
7,862
8,827
3,726
12,368
5,462
2,933
5,378
7,674
Life on which
depreciation
in latest
income
statement
is completed
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
Date of
Const.
1997/00
2003
2003/04
2009
2000
2008
2008
2009
2009
2008
2007
1999
1988
2007
2006
1993
2001
2000
1998
2000
1998
1998
2000
1994
1993
1999
1984
2006
1999
2000
2001
1997
1999
1997
2000
1999
1982
2004
1996
2005
1996/2004
1998
2007
2009
2008
2007
2007
2009
2008
2007
2009
2002
1999/2006
2007
2008
2005
2005
2008
2011
1997
1998
2000
2000
Date
Acquired
1/17/2008
1/17/2008
12/31/2008
10/1/2009
12/28/2010
12/29/2010
12/29/2010
12/29/2010
12/29/2010
12/29/2010
12/29/2010
7/14/2011
7/14/2011
7/28/2011
8/17/2011
9/22/2011
9/22/2011
9/22/2011
9/22/2011
9/22/2011
9/22/2011
9/22/2011
9/22/2011
9/22/2011
9/22/2011
9/22/2011
9/22/2011
9/22/2011
9/22/2011
9/22/2011
9/22/2011
9/22/2011
9/22/2011
9/22/2011
9/22/2011
9/22/2011
9/22/2011
9/29/2011
11/15/2011
5/16/2012
6/6/2012
6/6/2012
6/20/2012
7/18/2012
9/18/2012
9/18/2012
9/18/2012
9/18/2012
9/18/2012
9/18/2012
9/18/2012
9/19/2012
9/27/2012
12/10/2012
12/18/2012
12/20/2012
12/20/2012
12/20/2012
12/20/2012
12/21/2012
12/21/2012
12/21/2012
12/21/2012
Accum.
Deprec.
1,529
1,308
772
1,334
691
667
661
849
794
585
555
1,388
498
392
1,145
679
545
499
440
801
512
586
651
391
528
542
741
678
493
680
526
430
606
880
581
805
376
861
648
1,446
1,372
621
723
798
676
490
475
1,058
491
482
578
608
382
650
418
548
695
340
1,010
422
275
458
654
98
Encum
brance
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.
ST
TX
TX
TX
IL
TX
NY
MA
NY
NY
CO
NJ
FL
TX
CT
NJ
FL
FL
TX
TX
ME
ME
IL
IL
TX
MO
MO
MO
MO
MO
MO
NJ
NY
GA
NJ
NJ
NJ
NJ
NJ
FL
VA
TX
TN
LA
FL
TX
IL
TX
CT
CT
NY
NY
IL
IL
FL
TX
FL
FL
FL
FL
FL
AZ
MA
NY
Land
Initial Cost to Company
Building,
Equipment
and
Impvmts.
5,740
3,327
1,985
3,126
2,005
8,735
7,186
8,276
10,102
5,201
6,544
5,306
5,226
8,816
10,946
11,918
17,520
4,297
6,269
6,418
5,234
6,301
4,789
3,749
5,966
3,518
3,544
2,042
4,045
4,510
7,063
6,006
4,931
2,292
4,734
5,618
4,549
9,707
6,904
3,875
8,190
5,608
10,375
4,641
8,374
4,700
5,813
18,374
23,352
27,401
20,415
4,066
6,971
4,382
4,777
6,501
4,409
6,045
4,206
5,012
7,052
8,182
3,795
1,246
774
632
269
337
2,122
1,553
1,096
2,224
629
1,843
868
1,547
1,174
1,639
7,629
15,680
3,999
2,235
2,146
493
1,837
598
2,000
2,444
638
2,010
508
1,989
1,538
5,161
1,741
2,263
0
819
1,097
626
1,512
2,958
2,349
2,658
759
5,771
6,091
4,196
889
1,599
9,747
9,642
5,153
4,931
2,579
1,719
1,793
3,864
2,118
1,169
4,957
3,372
2,687
852
2,110
2,711
Cost
Capitalized
Subsequent
to
Acquisition
Building,
Equipment
and
Impvmts.
155
146
88
320
191
517
21
89
46
184
99
709
153
81
83
199
504
665
328
235
98
538
178
495
1,587
1,778
232
396
567
386
841
309
440
196
548
320
188
724
217
282
415
181
427
356
547
624
508
80
117
158
94
84
372
158
224
67
324
201
134
212
159
79
109
Land
Total
Gross Amount at Which
Carried at Close of Period
Building,
Equipment
and
Impvmts.
5,895
3,473
2,073
3,446
2,196
9,252
7,254
8,365
10,148
5,385
6,643
6,015
5,379
8,897
11,029
12,117
18,024
4,962
6,597
6,653
5,332
6,839
4,967
4,244
7,553
5,296
3,776
2,438
4,612
4,896
7,904
6,315
5,371
2,488
5,282
5,938
4,737
10,431
7,121
4,157
6,719
5,789
10,802
4,997
8,921
5,324
6,321
18,454
23,469
27,559
20,509
4,150
7,343
4,540
5,001
6,568
4,733
6,246
4,340
5,224
7,211
8,261
3,904
1,246
774
632
269
337
2,122
1,506
1,096
2,224
629
1,843
868
1,547
1,174
1,639
7,629
15,680
3,999
2,235
2,146
493
1,837
598
2,000
2,444
638
2,010
508
1,989
1,538
5,161
1,741
2,263
0
819
1,097
626
1,512
2,958
2,349
4,544
759
5,771
6,091
4,196
889
1,599
9,747
9,642
5,153
4,931
2,579
1,719
1,793
3,864
2,118
1,169
4,957
3,372
2,687
852
2,110
2,711
7,141
4,247
2,705
3,715
2,533
11,374
8,760
9,461
12,372
6,014
8,486
6,883
6,926
10,071
12,668
19,746
33,704
8,961
8,832
8,799
5,825
8,676
5,565
6,244
9,997
5,934
5,786
2,946
6,601
6,434
13,065
8,056
7,634
2,488
6,101
7,035
5,363
11,943
10,079
6,506
11,263
6,548
16,573
11,088
13,117
6,213
7,920
28,201
33,111
32,712
25,440
6,729
9,062
6,333
8,865
8,686
5,902
11,203
7,712
7,911
8,063
10,371
6,615
Life on which
depreciation
in latest
income
statement
is completed
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
Date of
Const.
2006
2004
2007
2010
2005
2002
2008
2009
2009
2006
2007
2000
2008
2004
2006
1998
2000
1998/2002
2012
2000
2006
2004/2013
2014
1997
1998
1998
2000
1996
1997
2000
1980
2005
2007
2000
2003
2004
2003
2005
2007
2000
2002
2014
2008
2006
2003
2014
2006
1999
1999
2002
2000
1986
2015
2004
2002
2013
1997
2001
1985
2000
2015
2015
2000
Date
Acquired
12/27/2012
12/27/2012
12/27/2012
12/31/2012
2/11/2013
3/22/2013
3/22/2013
8/29/2013
8/29/2013
9/30/2013
11/26/2013
12/4/2013
12/27/2013
12/30/2013
12/30/2013
1/9/2014
1/9/2014
1/17/2014
2/10/2014
2/11/2014
2/11/2014
3/31/2014
5/5/2014
5/13/2014
5/22/2014
5/22/2014
5/22/2014
5/22/2014
5/22/2014
5/22/2014
6/5/2014
6/11/2014
6/12/2014
6/12/2014
6/18/2014
6/18/2014
6/18/2014
7/10/2014
8/28/2014
9/5/2014
9/10/2014
9/18/2014
10/10/2014
10/21/2014
10/28/2014
11/14/2014
12/18/2014
2/2/2015
2/2/2015
2/2/2015
2/2/2015
2/5/2015
3/9/2015
4/1/2015
4/16/2015
4/21/2015
5/1/2015
5/1/2015
5/1/2015
5/1/2015
6/16/2015
6/16/2015
8/25/2015
Accum.
Deprec.
615
363
244
336
238
857
727
731
879
442
575
490
449
674
862
949
1,437
409
514
525
411
506
355
316
549
336
303
201
365
390
522
424
392
411
368
425
316
668
446
272
424
366
652
297
510
293
343
892
1,139
1,392
994
204
344
234
226
312
204
293
216
250
302
379
171
99
Encum
brance
4,207
4,002
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.,
ST
NY
NY
NY
NC
SC
SC
SC
SC
PA
FL
FL
FL
CA
CA
CA
CA
NH
NH
NH
NH
NH
MA
TX
TX
TX
AZ
FL
PA
CO
CA
CA
CA
CA
CA
CT
CT
NY
NY
FL
TX
NY
NY
TX
TX
TX
TX
TX
TX
TX
IL
IL
IL
IL
IL
IL
IL
IL
IL
IL
IL
IL
IL
IL
Land
Initial Cost to Company
Building,
Equipment
and
Impvmts.
1,957
5,368
1,705
2,977
9,086
6,147
3,452
3,192
4,498
5,756
2,838
10,014
12,352
13,547
14,826
10,419
2,709
3,333
6,295
2,861
26,040
6,342
5,088
7,047
6,462
8,224
8,980
3,879
7,915
25,145
6,318
13,908
10,340
18,839
5,286
5,618
5,089
13,112
7,176
8,302
5,198
2,323
8,163
14,833
12,269
20,782
6,129
10,647
9,238
14,958
4,710
25,112
19,159
10,628
26,660
20,033
14,914
19,990
11,881
10,811
18,729
12,584
12,721
668
473
834
718
7,604
2,511
3,640
3,084
1,926
882
2,567
4,884
6,512
3,998
4,636
13,274
1,713
1,615
2,445
3,078
4,430
4,880
6,191
8,097
5,508
988
2,294
1,768
4,528
17,976
0
4,671
6,728
17,445
3,618
2,524
2,373
3,337
4,140
2,333
499
215
1,030
1,210
930
3,070
830
1,530
750
1,430
350
2,770
1,190
1,720
3,670
1,090
1,610
3,770
1,340
1,670
670
1,130
5,600
Cost
Capitalized
Subsequent
to
Acquisition
Building,
Equipment
and
Impvmts.
80
85
45
805
169
219
64
89
97
241
51
109
327
220
107
333
29
36
23
38
46
71
140
62
61
40
131
78
85
372
211
80
186
402
181
74
161
75
232
122
106
240
83
53
46
111
44
54
49
26
14
85
40
58
126
49
40
74
33
24
20
71
24
Land
Total
Gross Amount at Which
Carried at Close of Period
Building,
Equipment
and
Impvmts.
2,037
5,453
1,750
3,782
9,255
6,366
3,516
3,281
4,595
5,997
2,889
10,123
12,679
13,767
14,933
10,752
2,738
3,369
6,318
2,899
26,086
6,413
5,228
7,109
6,523
8,264
9,111
3,957
8,000
25,517
6,529
13,988
10,526
19,241
5,467
5,692
5,250
13,187
7,408
8,424
5,304
2,563
8,246
14,886
12,315
20,893
6,173
10,701
9,287
14,984
4,724
25,197
19,199
10,686
26,786
20,082
14,954
20,064
11,914
10,835
18,749
12,655
12,745
668
473
834
718
7,604
2,511
3,640
3,084
1,926
882
2,567
4,884
6,512
3,998
4,636
13,274
1,713
1,615
2,445
3,078
4,430
4,880
6,191
8,097
5,508
988
2,294
1,768
4,528
17,976
0
4,671
6,728
17,445
3,618
2,524
2,373
3,337
4,140
2,333
499
215
1,030
1,210
930
3,070
830
1,530
750
1,430
350
2,770
1,190
1,720
3,670
1,090
1,610
3,770
1,340
1,670
670
1,130
5,600
2,705
5,926
2,584
4,500
16,859
8,877
7,156
6,365
6,521
6,879
5,456
15,007
19,191
17,765
19,569
24,026
4,451
4,984
8,763
5,977
30,516
11,293
11,419
15,206
12,031
9,252
11,405
5,725
12,528
43,493
6,529
18,659
17,254
36,686
9,085
8,216
7,623
16,524
11,548
10,757
5,803
2,778
9,276
16,096
13,245
23,963
7,003
12,231
10,037
16,414
5,074
27,967
20,389
12,406
30,456
21,172
16,564
23,834
13,254
12,505
19,419
13,785
18,345
Life on which
depreciation
in latest
income
statement
is completed
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
Date of
Const.
2002
2005/2011
2000
2000
2005
1999
2004/2008
1998
2010
2001
1997
2001/2006
2004
2012
2006
2004/2014
2003
2003
2005
2000
1985/1999
2003
2003
2003
2002
2015
2016
1970
2011
2005
1985
2015
2005
2003
2000
2001
1991/1944
2013
2002
2007
2006
2006
1984
2003
1999
2005
1986
2001/2015
2005
2006
2004
2007
2009
2007
2009
2009
2009
2008
2008
2010
2008
2003
2006
Date
Acquired
8/25/2015
8/25/2015
8/25/2015
9/1/2015
9/1/2015
9/1/2015
9/1/2015
9/1/2015
12/30/2015
1/6/2016
1/6/2016
1/6/2016
1/21/2016
1/21/2016
1/21/2016
1/21/2016
1/21/2016
1/21/2016
1/21/2016
1/21/2016
1/21/2016
1/21/2016
1/21/2016
1/21/2016
1/21/2016
2/1/2016
2/12/2016
2/17/2016
2/29/2016
3/16/2016
3/16/2016
3/16/2016
3/17/2016
4/11/2016
4/14/2016
4/14/2016
4/26/2016
4/26/2016
5/2/2016
5/5/2016
5/19/2016
5/19/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
Accum.
Deprec.
82
210
64
150
322
253
153
127
150
150
77
116
319
323
347
267
67
95
160
70
606
182
128
174
156
201
222
98
175
491
264
269
210
370
104
109
87
226
161
149
80
38
106
189
159
282
80
145
120
193
61
319
241
134
338
257
189
262
153
136
236
162
162
100
Encum
brance
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
ST
IL
IL
IL
IL
IL
IL
IL
IL
IL
IL
TX
TX
TX
TX
TX
CO
CO
CO
CO
TX
TX
TX
TX
TX
MS
NV
NV
NV
NV
NV
NV
NV
NV
NV
NV
NV
NV
NV
NV
NV
NV
NV
CA
CA
CA
WI
FL
FL
FL
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
UT
TX
TX
SC
Land
Initial Cost to Company
Building,
Equipment
and
Impvmts.
12,053
4,960
8,928
15,574
18,623
9,395
11,933
10,087
13,019
8,519
10,282
12,785
10,166
8,771
8,029
12,074
15,304
15,571
5,623
8,288
10,114
9,585
3,951
2,382
20,066
25,152
11,822
16,838
6,977
11,047
7,042
5,141
10,295
16,436
5,233
17,366
23,333
13,451
15,651
12,676
10,105
9,388
32,363
18,402
16,589
14,720
6,688
9,586
3,713
17,069
22,150
8,874
8,944
10,569
12,239
21,603
24,650
24,829
15,695
12,301
8,457
7,323
7,700
1,590
1,050
1,780
600
3,230
1,890
2,620
1,100
960
3,210
630
790
1,370
620
4,030
3,690
2,650
11,540
2,670
2,760
8,080
1,960
680
1,260
680
1,020
2,510
590
350
1,470
390
1,340
1,420
1,080
790
1,470
3,050
980
330
570
520
1,510
5,250
2,520
2,660
750
640
1,230
1,080
2,280
1,200
540
2,010
860
1,450
1,640
2,120
1,610
1,480
780
1,380
990
920
Cost
Capitalized
Subsequent
to
Acquisition
Building,
Equipment
and
Impvmts.
32
45
80
47
195
65
62
35
28
35
43
44
34
32
64
28
30
34
42
96
96
65
48
44
36
16
15
3
86
15
20
51
21
15
7
17
6
23
19
37
6
13
61
134
69
3
38
27
29
20
16
12
10
18
7
10
7
13
126
-88
57
48
25
Land
Total
Gross Amount at Which
Carried at Close of Period
Building,
Equipment
and
Impvmts.
12,085
5,005
9,008
15,621
18,818
9,460
11,995
10,122
13,047
8,554
10,325
12,829
10,200
8,803
8,093
12,102
15,334
15,605
5,665
8,384
10,210
9,650
3,999
2,426
20,102
25,168
11,837
16,841
7,063
11,062
7,062
5,192
10,316
16,451
5,240
17,383
23,339
13,474
15,670
12,713
10,111
9,401
32,424
18,536
16,658
14,723
6,726
9,613
3,742
17,089
22,166
8,886
8,954
10,587
12,246
21,613
24,657
24,842
15,821
12,213
8,514
7,371
7,725
1,590
1,050
1,780
600
3,230
1,890
2,620
1,100
960
3,210
630
790
1,370
620
4,030
3,690
2,650
11,540
2,670
2,760
8,080
1,960
680
1,260
680
1,020
2,510
590
350
1,470
390
1,340
1,420
1,080
790
1,470
3,050
980
330
570
520
1,510
5,250
2,520
2,660
750
640
1,230
1,080
2,280
1,200
540
2,010
860
1,450
1,640
2,120
1,610
1,480
780
1,380
990
920
13,675
6,055
10,788
16,221
22,048
11,350
14,615
11,222
14,007
11,764
10,955
13,619
11,570
9,423
12,123
15,792
17,984
27,145
8,335
11,144
18,290
11,610
4,679
3,686
20,782
26,188
14,347
17,431
7,413
12,532
7,452
6,532
11,736
17,531
6,030
18,853
26,389
14,454
16,000
13,283
10,631
10,911
37,674
21,056
19,318
15,473
7,366
10,843
4,822
19,369
23,366
9,426
10,964
11,447
13,696
23,253
26,777
26,452
17,301
12,993
9,894
8,361
8,645
Life on which
depreciation
in latest
income
statement
is completed
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
5 to 40 years
Date
Acquired
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/15/2016
7/29/2016
Date of
Const.
2007
2006
2007
2008
2008
2015
2015
2015
2015
2014/2015
2001
2007
1998
2016
2016
1992
1998
1984
1992
1996
2008
1972
2005
1994
2000
2000
2005
2008
1996
2004
2005
2004
2007
2007
1995
2004
2005
2007
2007
2005
2002
2008
2004
2002
2002
2005
2006
2000
2000
2004
2005
2004
2005
2003
2002
2005
2003
2007
2007
2007
2003
2016
2016
Accum.
Deprec.
161
68
113
197
243
123
160
130
167
114
136
164
130
113
104
158
201
204
75
110
132
125
53
35
260
320
151
212
91
144
91
83
138
209
73
231
327
171
199
167
132
121
412
234
216
189
87
123
49
220
279
115
122
135
158
277
318
319
207
154
108
96
87
101
Description
Denver - Westminster
Chicago - Arlington Hgts.
Orlando - Curry Ford
Construction in Progress
Corporate Office
ST
CO
IL
FL
NY
Encum
brance
2,966
Land
Initial Cost to Company
Building,
Equipment
and
Impvmts.
3,679
8,513
6,378
0
68
5,062
370
3,268
0
0
Cost
Capitalized
Subsequent
to
Acquisition
Building,
Equipment
and
Impvmts.
172
3
23
14,524
33,969
Land
Gross Amount at Which
Carried at Close of Period
Building,
Equipment
and
Impvmts.
3,851
8,516
6,401
14,524
32,404
5,062
370
3,268
0
1,633
Total
8,913
8,886
9,669
14,524
34,037
Life on which
depreciation
in latest
income
statement
is completed
5 to 40 years
5 to 40 years
5 to 40 years
Date
Acquired
8/4/2016
11/17/2016
12/20/2016
5/1/2000
5 to 40 years
Accum.
Deprec.
40
18
13
0
17,651
Date of
Const.
2000
2016
2016
2015
2000
$13,027
$772,601
$2,965,619
$505,088
$786,764
$3,456,544
$4,243,308
$535,704
102
(dollars in thousands)
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 ............................................
December 31, 2016
December 31, 2015
December 31, 2014
$2,491,702
$ 2,177,983
$ 1,864,637
-
1,714,029
73,385
1,787,414
(35,808)
-
-
(35,808)
-
278,572
42,046
320,618
(6,899)
-
-
(6,899)
-
286,691
35,097
321,788
(8,442)
-
-
(8,442)
Balance at close of period..........................
$4,243,308
$ 2,491,702
$ 2,177,983
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 ........................................................
$ 465,195
$ 411,701
$ 366,472
87,219
87,219
(16,710)
-
-
(16,710)
55,101
55,101
(1,607)
-
-
(1,607)
47,656
47,656
(2,427)
-
-
(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.
103
Life Storage, Inc.
Life Storage LP
Statement Re: Computation of Earnings to
Combined Fixed Charges and Preferred Stock Dividends
Exhibit 12.1
Amounts in thousands
Earnings:
Income from continuing operations
before noncontrolling interest in
consolidated subsidiaries and
income from equity investees
Add: Income tax expense
Add: Fixed charges
Add: Distributed income of equity
investees
Less: Capitalized interest
Preferred dividend requirements of
consolidated subsidiaries
Earnings (1)
Fixed charges:
Interest expense
Amortization of financing fees
Capitalized interest
Estimate of interest included in rent
expense
Preferred stock dividends
Fixed charges (2)
Ratio of earnings to combined fixed
charges and preferred stock dividends
(1)/(2)
2016
Year ended December 31,
2015
2014
2013
2012
$81,291
413
55,001
5,207
(96)
-
141,816
52,769
1,735
96
401
-
$55,001
$109,672
1,251
37,864
$86,971
927
39,024
$69,524
936
32,720
4,821
(62)
3,123
(84)
2,630
(113)
-
153,546
-
129,961
-
105,697
35,940
1,184
62
678
-
$37,864
33,719
859
84
4,362
-
$39,024
31,166
834
113
607
-
$32,720
$47,185
1,326
33,547
2,184
(149)
-
84,093
32,330
836
149
232
-
$33,547
2.58
4.06
3.33
3.23
2.51
THIS PAGE LEFT BLANK INTENTIONALLY
Officers & Directors
Robert J. Attea
Director
Executive Chairman
of the Board
Mark G. Barberio
Director
Principal
Markapital, LLC
Arthur L. Havener, Jr.
Director
Principal
Stampede Capital, LLC
Charles E. Lannon
Director
President
Strategic Advisory, Inc.
Kenneth F. Myszka
Director
President
Stephen R. Rusmisel
Director
Partner (Retired)
Pillsbury, Winthrop, Shaw,
Pittman LLC
David Rogers
Chief Executive Officer
Andrew J. Gregoire
Chief Financial Officer
and Corporate Secretary
Edward F. Killeen
Chief Operating Officer
Paul T. Powell
Chief Investment Officer
Registrar and Transfer Agent
American Stock Transfer
& Trust Company LLC
6201 15th Avenue
Brooklyn, New York 11219
(800) 937-5449
Annual Meeting
May 18, 2017
Life Storage, Inc.
Home Office
6467 Main Street
Williamsville, New York 14221
9:00 a.m. (e.d.t.)
Investor Relations
Diane Piegza
(716) 633-1850
invest.lifestorage.com
Independent Auditors
Ernst & Young LLP
1500 Key Tower
Buffalo, New York 14202
Corporate Counsel
Phillips Lytle LLP
One Canalside
125 Main Street
Buffalo, New York 14203
Exchange
New York Stock Exchange
Listing Symbol: LSI
Average Daily Volume
in 2016: 524,254
The Chief Executive Officer has
previously filed with the New York
Stock Exchange (NYSE) the annual
CEO certification for 2016 as required
by section 303A.12(a) of the NYSE
listed company manual.
As of December 31, 2016, there were
approximately 666 shareholders of
record of the common stock.
Life Storage, Inc. I 6467 Main Street I Williamsville, NY 14221
I 716.633.1850