EXHIBIT 99.1
Published on August 5, 2016
CPA 17 Portfolio
Historical Statements of Revenue and Certain Expenses of Acquisition Properties
National Storage Affiliates Trust
F-1
INDEPENDENT AUDITORS’ REPORT
To National Storage Affiliates Trust
We have audited the accompanying combined statements of revenue and certain expenses of the CPA 17 Portfolio for the year ended December 31, 2015, and the related notes to the combined financial statements.
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS
Management is responsible for the preparation and fair presentation of these combined financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the combined financial statements that are free from material misstatement, whether due to fraud or error.
AUDITORS’ RESPONSIBILITY
Our responsibility is to express an opinion on these combined financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements of revenue and certain expenses. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the combined financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the combined statements of revenue and certain expenses in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the combined financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OPINION
In our opinion, the combined financial statements referred to above present fairly, in all material respects, the revenue and certain expenses described in Note 1 to the combined financial statements of the CPA 17 Portfolio for the year ended December 31, 2015, in accordance with U.S. generally accepted accounting principles.
BASIS OF ACCOUNTING
As described in Note 1 to the combined financial statements, the statements of revenue and certain expenses have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, and are not intended to be a complete presentation of revenue and expenses of the CPA 17 Portfolio. Our opinion is not modified with respect to this matter.
/s/ EKS&H LLLP
Denver, Colorado
August 5, 2016
F-2
CPA 17 Portfolio
Combined Statements of Revenue and Certain Expenses
For the Three Months Ended March 31, 2016 (unaudited) and the Year Ended December 31, 2015
(dollars in thousands)
2016 |
2015 |
||||||
(Unaudited) |
|||||||
Revenue |
|||||||
Rental revenue |
$ |
3,629 |
$ |
13,461 |
|||
Other property-related revenue |
18 |
79 |
|||||
Total revenue |
3,647 |
13,540 |
|||||
Certain Expenses |
|||||||
Property operating expenses |
1,039 |
4,073 |
|||||
Real estate taxes |
265 |
1,063 |
|||||
Supervisory and administrative fees |
224 |
849 |
|||||
Total certain expenses |
1,528 |
5,985 |
|||||
Revenue in excess of certain expenses |
$ |
2,119 |
$ |
7,555 |
|||
The accompanying notes are an integral part of these combined statements of revenue and certain expenses.
F-3
CPA 17 Portfolio
Notes to Combined Statements of Revenue and Certain Expenses
(dollars in thousands)
1. |
BASIS OF PRESENTATION |
On August 1, 2016, National Storage Affiliates Trust (“NSA”) acquired twenty-two self storage properties located in various sub-markets in California (the “CPA 17 Portfolio”) from an unrelated third party (the “Seller”).
The accompanying combined statements of revenue and certain expenses (the “Statements”) of the CPA 17 Portfolio have been prepared pursuant to Rule 3-14 of Regulation S-X promulgated by the Securities and Exchange Commission. Accordingly, the Statements are not representative of the entire operations of the CPA 17 Portfolio for the periods presented as certain items are excluded. Such omitted items consist of depreciation and amortization, interest expense, and administrative costs not directly related to the future operations of the CPA 17 Portfolio.
The unaudited interim combined statements of revenue and certain expenses for the period from January 1, 2016 through March 31, 2016, were prepared on the same basis as the combined statements of revenue and certain expenses for the year ended December 31, 2015, and reflects all adjustments, consisting of only normal recurring adjustments, which are, in the opinion of management necessary for a fair presentation of the results of the unaudited interim period. The results of the unaudited interim period are not necessarily indicative of the expected results for the entire fiscal year.
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition. Management has determined that all of the leases associated with the CPA 17 Portfolio are operating leases, which generally may be terminated on a month-to-month basis. Rental income is recognized ratably over the lease term using the straight-line method. Rents received in advance are deferred and recognized on a straight-line basis over the related lease term associated with the prepayment. Promotional discounts and other incentives are recognized as a reduction to rental income over the applicable lease term. Other property-related revenue consists of ancillary revenues such as tenant insurance commissions and sales of storage supplies, which are recognized in the period earned.
Advertising Costs. Advertising costs are primarily attributable to internet, directory and other advertising. Advertising costs were expensed in the period in which the cost was incurred. Advertising costs amounted to $65 (unaudited) and $257 for the three months ended March 31, 2016 and the year ended December 31, 2015, respectively.
Repairs and Maintenance. Major replacements and betterments that improved or extended the life of the CPA 17 Portfolio were capitalized. Expenditures for ordinary repairs and maintenance were expensed as incurred. Repairs and maintenance amounted to $64 (unaudited) and $293 for the three months ended March 31, 2016 and the year ended December 31, 2015, respectively.
3. |
RELATED PARTY TRANSACTIONS |
The CPA 17 Portfolio is subject to agreements entered into with Extra Space Management, Inc. (“Extra Space”) that provide for a fee equal to 6% of gross revenue (as defined in the agreements and subject to a minimum). The amounts incurred under these agreements are included in supervisory and administrative fees in the accompanying combined statements of revenue and certain expenses. The services provided by Extra Space consist of supervisory, administrative, leasing and related services.
F-4
CPA 17 Portfolio
Notes to Combined Statements of Revenue and Certain Expenses
(dollars in thousands)
The employees responsible for operation of the CPA 17 Portfolio are employees of Extra Space. The amounts charged by Extra Space for salaries, wages and benefits for the CPA 17 Portfolio are included in property operating expenses and amounted to $430 (unaudited) and $1,641 for the three months ended March 31, 2016 and the year ended December 31, 2015, respectively.
4. |
SUBSEQUENT EVENTS |
Management has evaluated the events and transactions that have occurred through August 5, 2016, the date that the Statements were available to be issued, and noted no items requiring adjustment of the Statements or additional disclosure.
F-5