U-Haul 2007 Annual Report Download - page 91

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AMERCO AND CONSOLIDATED ENTITIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
W.P. Carey Transactions
In 1999, AMERCO, U-Haul and Real Estate entered into financing agreements for the purchase and construction of
self-storage facilities with the Bank of Montreal and Citibank (the “leases” or the “synthetic leases”). Title to the real
property subject to these leases was held by non-affiliated entities.
These leases were amended and restated on March 15, 2004. In connection with such amendment and restatement, we
paid down approximately $31.0 million of lease obligations and entered into leases with a three year term, with four one
year renewal options. After such pay down, our lease obligation under the amended and restated synthetic leases was
approximately $218.5 million.
On April 30, 2004, the amended and restated leases were terminated and the properties underlying these leases were
sold to UH Storage (DE) Limited Partnership, an affiliate of W. P. Carey. U-Haul entered into a ten year operating lease
with W. P. Carey (UH Storage DE) for a portion of each property (the portion of the property that relates to U-Haul’ s truck
and trailer rental and moving supply sales businesses). The remainder of each property (the portion of the property that
relates to self-storage) was leased by W. P. Carey (UH Storage DE) to Mercury Partners, LP (“Mercury”) pursuant to a
twenty year lease. These events are referred to as the “W. P. Carey Transactions.” As a result of the W. P. Carey
Transactions, we no longer have a capital lease related to these properties.
The sales price for these transactions was $298.4 million and cash proceeds were $298.9 million. The Company realized
a gain on the transaction of $2.7 million, which is being amortized over the life of the lease term.
As part of the W. P. Carey Transactions, U-Haul entered into agreements to manage these properties (including the
portion of the properties leased by Mercury). These management agreements allow us to continue to operate the properties
as part of the U-Haul moving and self-storage system.
U-Haul’ s annual lease payments under the new lease are approximately $10.0 million per year, with Consumer Price
Index (“CPI”) inflation adjustments beginning in the sixth year of the lease. The lease term is ten years, with a renewal
option for an additional ten years. Upon closing of the W. P. Carey Transactions, we made a $22.9 million earn-out deposit,
providing us with the opportunity to be reimbursed for certain capital improvements we previously made to the properties,
and a $5.0 million security deposit. U-Haul met the requirements under the lease regarding the return of the earn-out
deposit which was refunded in fiscal 2006.
The property management agreement we entered into with Mercury provides that Mercury will pay U-Haul a
management fee based on gross self-storage rental revenues generated by the properties. During fiscal 2007 and 2006, U-
Haul received cash payments of $1.8 million and $3.4 million, respectively in management fees from Mercury.
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