Sovran Self Storage, Inc. (NYSE:SSS), a self storage real estate
investment trust (REIT), reported operating results for the quarter
ended March 31, 2011.
Net income available to common shareholders for the first
quarter of 2011 was $8.3 million or $0.30 per fully diluted share.
For the same period in 2010, net income available to common
shareholders was $7.4 million, or $0.27 per fully diluted common
share. Funds from operations (FFO) for the quarter were $0.62 per
fully diluted common share compared to $0.60 for the same period
last year.
Improved occupancy and the reduced use of move-in incentives
contributed to the increase in earnings and FFO for the first
quarter of 2011.
“We’re encouraged by the recovering demand for space in most of
our markets, and our ability to regain pricing power,” said Kenneth
F. Myszka, the Company’s President and COO. “We expect to see
continued improvements as the busy season gets started.”
OPERATIONS:
Total revenues increased 4.8% over last year’s first quarter,
while operating costs increased 2.3%, resulting in an NOI increase
of 6.3%. Overall occupancy averaged 79.2% for the period and rental
rates improved to an average of $10.48 per sq. ft.
Revenues for the 344 stores wholly owned by the Company for the
entire quarter of each year increased 3.0% from those of the first
quarter of 2010, the result of a 60 basis point increase in average
occupancy, a 0.7% increase in rental rates and strong growth in
other revenues.
Same store operating expenses increased 0.6% for the first
quarter of 2011 compared to the prior year period, the result of
modest increases in property payroll expenses and snow removal
costs offset by a property tax decrease of 4.6%.
Consequently, same store net operating income increased 4.4%
this period over the first quarter of 2010.
General and administrative expenses grew by about $0.7 million
over the same period in 2010, primarily due to increased training,
internet advertising and personnel costs.
During the first quarter of 2011, all but 2 of the 22 states
included in the Company’s same store base achieved sales greater
than the same period in 2010. The stores with the strongest revenue
growth include those in New England, New York, and Tennessee. With
regard to these results, Myszka commented, “We are especially
encouraged by the 2.5% revenue increase shown in the Florida
portfolio.”
PROPERTIES:
The Company is in negotiations and/or contract to acquire
approximately $200 million of property. $160 million of this total
is on behalf of a joint venture to be sponsored by the Company to
which it expects to contribute 15% of the equity required. The
remaining $40 million of properties are expected to be acquired by
the Company on a wholly owned basis. Since all of the acquisitions
are subject to remaining due diligence and other contingencies, no
assurance can be given that any or all of the transactions will be
consummated.
The Company is kick-starting its program of expanding and
enhancing its properties. In 2011, 27 projects providing up to
700,000 square feet of additional and/or improved space at existing
stores are planned. “We are pleased to revitalize our expansion and
enhancement program following the hiatus triggered by the industry
slowdown of 2009-10,” said Robert J. Attea, Chairman and CEO. “This
is yet another positive sign that business is returning to
normal.”
CAPITAL TRANSACTIONS:
At March 31, 2011, the Company had $400 million of unsecured
term note debt, $78.3 million of mortgage debt outstanding and $16
million drawn on its line of credit. The Company has no significant
debt maturities until mid-2012.
Illustrated below are key financial ratios at March 31,
2011:
-- Debt to Enterprise Value (at $39.55/share) 30.8%
-- Debt to Book Cost of Storage Facilities 34.7% -- Debt to EBITDA
Ratio 4.9x -- Debt Service Coverage 3.2x
At March 31, 2011, the Company had approximately $4.9 million of
cash on hand, and up to $109 million available on its line of
credit.
YEAR 2011 EARNINGS GUIDANCE:
Management is encouraged by improving demand in most markets.
Nonetheless, the Company anticipates the continuation of leasing
incentives supplemented by aggressive and increased advertising. An
increase in same store revenue of 2% to 4% is projected from that
of 2010. Property operating costs are projected to increase by 2%
to 3%, including an expected 4% annual increase in property taxes.
Accordingly, the Company is anticipating an increase of 2% to 4% in
same store net operating income for 2011.
The Company intends to spend up to $32 million on its
aforementioned expansion and enhancement program. It has also
budgeted $11 million to provide for recurring capitalized
expenditures including roofing, painting, paving, and office
renovations.
Purchases of properties made in 2011 are not expected to impact
2011’s guidance inasmuch as the Company expects to invest in both
low occupancy “turn-around” opportunities as well as stabilized
properties. No significant acquisitions are expected to close until
the second half of the year. The impact of the aforementioned joint
venture has not been included in current guidance.
General and administrative expenses are expected to increase due
to income taxes on its taxable REIT subsidiaries and the Company’s
plans to continue expanding its internet marketing presence.
At March 31, 2011, all but $16 million of the Company’s debt is
either fixed rate or covered by rate swap contracts that
essentially fix the rate. Subsequent borrowings that may occur will
be pursuant to the Company’s Line of Credit agreement at a floating
rate of LIBOR plus 1.375%.
At March 31, 2011, the Company had 27.7 million shares of common
stock outstanding and 0.34 million Operating Partnership Units
outstanding.
As a result of the above assumptions, management expects funds
from operations for the full year 2011 to be approximately $2.61 to
$2.65 per share, and between $0.64 and $0.66 for the second quarter
of 2011.
FORWARD LOOKING STATEMENTS:
When used within this news release, 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 could 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 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; the 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 ability to effectively
compete in the industries in which it does business; the Company’s
reliance on its call center; the Company’s cash flow may be
insufficient to meet required payments of principal, interest and
dividends; and tax law changes which may change the taxability of
future income.
CONFERENCE CALL:
Sovran Self Storage will hold its First Quarter Earnings Release
Conference Call at 9:00 a.m. Eastern Time on Thursday, May 5, 2011.
To access the conference call, dial 877.407.8033 (domestic), or
201.689.8033 (international). Management will accept questions from
registered financial analysts after prepared remarks; all others
are encouraged to listen to the call via webcast by accessing
“events and conference calls” under the investor relations tab at
www.unclebobs.com/company/.
The webcast will be archived for a period of 90 days; a
telephone replay will also be available for 72 hours by calling
877.660.6853 and entering pass codes 286/369892.
Sovran Self Storage, Inc. is a self-administered and
self-managed equity REIT that is in the business of acquiring and
managing self storage facilities. The Company operates 377 self
storage facilities in 24 states under the name “Uncle Bob’s Self
Storage”®. For more information, please contact David Rogers, CFO
or Diane Piegza, VP Corporate Communications at 716.633.1850 or
visit the Company’s Web site.
SOVRAN SELF STORAGE, INC. BALANCE SHEET
DATA (unaudited)
March 31,
December 31,
(dollars in thousands)
2011 2010
Assets Investment in storage facilities:
Land $ 240,656 $ 240,651 Building, equipment and construction in
progress
1,182,707
1,179,305 1,423,363 1,419,956 Less: accumulated
depreciation
(280,147 )
(271,797 ) Investment in storage
facilities, net 1,143,216 1,148,159 Cash and cash equivalents 4,859
5,766 Accounts receivable 1,914 2,377 Receivable from joint venture
232 253 Investment in joint venture 19,604 19,730 Prepaid expenses
6,355 4,408 Other assets
5,812
4,848 Total Assets
$
1,181,992 $ 1,185,541
Liabilities Line of credit $ 16,000 $ 10,000
Term notes 400,000 400,000 Accounts payable and accrued liabilities
18,018 23,991 Deferred revenue 5,034 4,925 Fair value of interest
rate swap agreements 8,777 10,528 Mortgages payable
78,344 78,954 Total
Liabilities 526,173 528,398 Noncontrolling redeemable
Operating Partnership Units at redemption value 13,408 12,480
Equity Common stock 289 288 Additional paid-in
capital 818,343 816,986 Accumulated deficit (153,429 ) (148,264 )
Accumulated other comprehensive loss (8,699 ) (10,254 ) Treasury
stock at cost
(27,175 )
(27,175 ) Total Shareholders' Equity
629,329 631,581 Noncontrolling interest - consolidated joint
venture
13,082
13,082 Total Equity
642,411
644,663 Total Liabilities and
Equity
$ 1,181,992 $
1,185,541 CONSOLIDATED
STATEMENTS OF OPERATIONS (unaudited)
January 1, 2011 January 1, 2010 to to (dollars in thousands,
except share data) March 31, 2011 March 31, 2010
Revenues Rental income $ 47,126 $ 45,349 Other operating
income 2,092 1,624 Management and acquisition fee income
317 311 Total
operating revenues 49,535 47,284
Expenses Property
operations and maintenance 13,513 12,934 Real estate taxes 5,044
5,211 General and administrative 5,814 5,139 Depreciation and
amortization 8,484 8,200 Amortization of in-place customer leases
141 - Total
operating expenses
32,996
31,484 Income from operations 16,539
15,800 Other income (expense) Interest expense
(A)
(7,897 ) (7,878 ) Interest income 18 20 Equity in income of joint
ventures
40 70
Income from continuing operations 8,700 8,012 Loss
from discontinued operations (including loss on disposal of $580 in
2010)
- (124
) Net income 8,700 7,888 Net income attributable to
noncontrolling interests
(440 )
(461 ) Net income attributable
to common shareholders $ 8,260
$ 7,427 Earnings per
common share attributable to common shareholders - basic
Continuing operations $ 0.30 $ 0.27 Discontinued operations
- - Earnings per
common share - basic
$ 0.30
$ 0.27 Earnings per
common share attributable to common shareholders - diluted
Continuing operations $ 0.30 $ 0.27 Discontinued operations
- - Earnings per
common share - diluted
$ 0.30
$ 0.27 Common shares used
in basic earnings per share calculation 27,537,278 27,445,101
Common shares used in diluted earnings per share calculation
27,577,435 27,479,148
Dividends declared per common
share $ 0.4500 $
0.4500
(A) Interest expense for the three
months ending March 31 consists of the following
Interest expense $ 7,640 $ 7,620 Amortization of deferred financing
fees
257 258
Total interest expense
$ 7,897
$ 7,878
COMPUTATION OF FUNDS FROM OPERATIONS (FFO) (1) - (unaudited)
January 1, 2011 January 1, 2010 to to (dollars in
thousands, except share data) March 31, 2011 March 31, 2010
Net income attributable to common shareholders $ 8,260 $ 7,427 Net
income attributable to noncontrolling interests 440 461
Depreciation of real estate and amortization of intangible assets
exclusive of deferred financing fees 8,625 8,200 Depreciation of
real estate included in discontinued operations - 163 Depreciation
and amortization from unconsolidated joint ventures 198 194 Loss on
sale of real estate - 580 Funds from operations allocable to
noncontrolling interest in Operating Partnership (206 ) (248 )
Funds from operations allocable to noncontrolling interest in
consolidated joint ventures
(340 )
(340 ) Funds from operations
available to common shareholders 16,977 16,437 FFO per share -
diluted $ 0.62 $ 0.60 Common shares - diluted 27,577,435
27,479,148 (1) 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. Funds from operations is
defined by the National Association of Real Estate Investment
Trusts, Inc. (“NAREIT”) as net income computed in accordance with
generally accepted accounting principles (“GAAP”), excluding gains
or losses on sales of properties, 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. 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.
QUARTERLY SAME STORE DATA (2) *
January 1, 2011
January 1, 2010
to to Percentage (dollars in thousands) March 31,
2011 March 31, 2010 Change
Revenues: Rental income $
46,283 $ 45,321 2.1 % Other operating income
1,960 1,537 27.5
% Total operating revenues 48,243 46,858 3.0 %
Expenses: Property operations and maintenance 13,214 12,860
2.8 % Real estate taxes
4,955
5,196 -4.6 % Total operating
expenses
18,169 18,056
0.6 % Operating income $ 30,074 $
28,802 4.4 % (2) Includes the 344 stores owned and/or managed by
the Company for the entire periods presented that are consolidated
in our financial statements. Does not include unconsolidated joint
venture stores managed by the Company. * See exhibit A for
supplemental same store data.
OTHER DATA
Same Store (2)
All Stores (3) Open
2011
2010
2011
2010
Weighted average quarterly occupancy 79.7% 79.1% 79.2% 79.0%
Occupancy at March 31 79.7% 78.9% 79.2% 78.8% Rent
per occupied square foot $10.49 $10.42 $10.48 $10.36 (3)
Does not include 25 unconsolidated joint venture stores managed by
the Company
Investment in
Storage Facilities:
The following summarizes activity in storage
facilities during the three months ended March 31, 2011:
Beginning balance $ 1,419,956 Property acquisitions - Improvements
and equipment additions: Expansions 4,884 Roofing, paving,
painting, and equipment: Stabilized stores 1,666 Recently acquired
and consolidated joint venture stores 186 Change in construction in
progress (Total CIP $4.9 million) (3,177 ) Dispositions
(152 ) Storage facilities at cost at
period end
$ 1,423,363
March 31,
2011
March 31,
2010
Common shares outstanding 27,679,360 27,566,605 Operating
Partnership Units outstanding 339,025 384,952
Exhibit A Sovran Self Storage, Inc.
Same Store Performance
Summary Three Months Ended March 31, 2011 (unaudited)
SquareFeet
Avg QtrlyRent
perOccupiedSquare Foot
Avg Quarterly Occupancyfor the
Three Months EndedMarch 31,
Revenuefor the Three
MonthsEnded March 31,
Expensesfor the Three
MonthsEnded March 31,
NOIfor the Three
MonthsEnded March 31,
State Stores
2011 2010 2011
2010 % Change 2011
2010 % Change 2011
2010 % Change Alabama 22 1,588 $ 8.19
76.2 % 74.0 % $ 2,671 $ 2,575 3.73 % $ 985 $ 982 0.31 % $ 1,686 $
1,593 5.84 % Arizona 9 530 10.18 85.0 % 83.0 % 1,233 1,190 3.61 %
435 418 4.07 % 798 772 3.37 % Connecticut 5 301 17.04 81.1 % 72.1 %
1,059 977 8.39 % 444 417 6.47 % 615 560 9.82 % Florida 53 3,449
10.58 77.2 % 77.5 % 7,311 7,135 2.47 % 2,769 2,814 -1.60 % 4,542
4,321 5.11 % Georgia 22 1,422 9.56 77.4 % 78.7 % 2,762 2,760 0.07 %
1,001 1,016 -1.48 % 1,761 1,744 0.97 % Louisiana 14 865 10.58 81.1
% 79.2 % 1,883 1,916 -1.72 % 573 571 0.35 % 1,310 1,345 -2.60 %
Maine 2 113 12.08 74.3 % 75.0 % 264 251 5.18 % 125 120 4.17 % 139
131 6.11 % Maryland 4 172 14.56 85.7 % 85.1 % 549 523 4.97 % 199
219 -9.13 % 350 304 15.13 % Massachusetts 12 664 12.78 81.1 % 79.2
% 1,798 1,697 5.95 % 798 744 7.26 % 1,000 953 4.93 % Michigan 4 239
8.51 90.3 % 83.5 % 478 443 7.90 % 223 214 4.21 % 255 229 11.35 %
Mississippi 12 926 9.34 80.2 % 82.4 % 1,826 1,792 1.90 % 550 559
-1.61 % 1,276 1,233 3.49 % Missouri 7 432 11.43 83.6 % 83.7 % 1,058
1,044 1.34 % 440 421 4.51 % 618 623 -0.80 % New Hampshire 4 260
10.97 82.6 % 77.9 % 589 547 7.68 % 232 231 0.43 % 357 316 12.97 %
New York 28 1,598 13.37 83.7 % 80.9 % 4,634 4,372 5.99 % 1,886
1,737 8.58 % 2,748 2,635 4.29 % North Carolina 11 539 9.35 78.3 %
78.8 % 1,006 1,018 -1.18 % 400 381 4.99 % 606 637 -4.87 % Ohio 17
1,132 8.99 83.8 % 84.2 % 2,209 2,126 3.90 % 868 874 -0.69 % 1,341
1,252 7.11 % Pennsylvania 4 230 10.07 81.5 % 80.4 % 439 425 3.29 %
164 181 -9.39 % 275 244 12.70 % Rhode Island 4 168 12.43 79.5 %
77.9 % 458 441 3.85 % 207 182 13.74 % 251 259 -3.09 % South
Carolina 8 443 9.81 79.4 % 77.2 % 905 872 3.78 % 349 370 -5.68 %
556 502 10.76 % Tennessee 4 291 8.63 87.9 % 80.4 % 573 521 9.98 %
254 250 1.60 % 319 271 17.71 % Texas 81 5,887 10.32 79.2 % 79.5 %
12,336 12,094 2.00 % 4,553 4,630 -1.66 % 7,783 7,464 4.27 %
Virginia 17 1,030 10.84 77.0 % 76.5 % 2,202 2,139 2.95 % 714 725
-1.52 % 1,488 1,414 5.23 %
Portfolio Total 344
22,279 $ 10.49 79.7 % 79.1 % $ 48,243 $
46,858 2.96 % $ 18,169 $ 18,056 0.63 % $
30,074 $ 28,802 4.42 %
Dollars in thousands
except for average quarterly rent per occupied square foot. Square
feet in thousands. 344 wholly owned same stores.
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