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Sovran Self Storage Reports Second Quarter Revenues Increase 12.6%5 August 2005
Sovran Self Storage, Inc., a self-storage real estate investment trust (REIT), reported operating results for the quarter ended June 30, 2005.
Net income available to common shareholders for the second quarter of 2005 was $7.6 million or $.47 per diluted share. Net income available to common shareholders for the same period in 2004 was $5.9 million or $.39 per diluted share. Funds from operations for the quarter were $12.6 million or $.76 per fully diluted common share compared to $10.4 million or $.69 per fully diluted share for the quarter ended June 30, 2004. Improved occupancies, strong rate growth and the benefits earned from the previously announced redemption of the Series B Preferred Stock contributed to the Company's performance this quarter.
The Company acquired five self storage facilities during the quarter, and four more in July for a total cost of $41 million.
David Rogers, the Company's Chief Financial Officer, commented, "Our marketing initiatives continue to drive growth - this is the eighth straight quarter that our same store sales have increased by more than 5%. We're also pleased with the nine newly acquired stores. They're good additions to strong markets where we already have a presence."
OPERATIONS:
Total Company net operating income for the second quarter grew 11.4% compared with the same quarter in 2004 to $22.3 million. This growth was the result of improved operating performance and the income earned from additional stores acquired in 2004 and the first half of 2005. Overall average occupancy was 85.5% and average rent per square foot for the portfolio was $9.62.
Revenues at the 262 stores owned (and/or operated) for the entire period in both years increased 5.4% over the second quarter of 2004, the result of a 4.6% increase in rental rates, a 70 basis point increase in average occupancy and a 19% increase in truck rental and other revenues. Increased repair and maintenance costs and expenses associated with the Uncle Bob's truck program caused same store operating expenses to increase by 6.4%; net operating income on a same store basis showed 4.9% growth to $21.8 million.
Strong performance was shown at the Company's stores throughout the Florida, North and South Carolina and Arizona markets, while some of the Pennsylvania, New York, and New England stores experienced slower than expected growth during the quarter.
ACQUISITIONS:
The Company acquired five properties during the quarter at a total cost of $29.4 million. The stores are all located in markets in which the Company already operates - Springfield and Boston, MA; Stamford, CT; Houston, TX; and Montgomery, AL. Shortly after the quarter ended, the Company acquired a portfolio of four Texas stores at a cost of $11.5 million.
CAPITAL TRANSACTIONS:
Late last year, the Company increased its line of credit capacity from $75 million to $100 million, and provided for another $100 million of availability. Interest rate reductions were negotiated on the Company's $100 million five year note (it now pays 1.2% over LIBOR) and on the line of credit (it now pays 90 basis points over LIBOR).
Both the five year note and the line of credit were extended by one year; the $100 million note now matures in September, 2009, and the line expires in September 2007, with the option to extend to 2008.
During the quarter, the Company issued 140,000 shares through its dividend reinvestment program, direct stock purchase plan and employee option plan and received a total of $4.7 million in proceeds. It also issued 195,000 shares to holders of its Series C Preferred Shares pursuant to warrants granted in 2002 for $6.4 million. Total proceeds of $11.1 million from these stock issuances were used to acquire the aforementioned properties.
The Company's Board of Directors authorized the repurchase of up to two million shares of the Company's common stock. To date, the Company has acquired approximately 1.2 million shares pursuant to the program. The Company expects such repurchases to be effected from time to time, in the open markets or in private transactions. The amount and timing of shares to be purchased will be subject to market conditions and will be based on several factors, including compliance with lender covenants and the price of the Company's stock. No assurance can be given as to the specific timing or amount of the share repurchases or as to whether and to what extent the share repurchase will be consummated. The Company did not acquire any shares in the quarter ended June 30, 2005.
YEAR 2005 EARNINGS GUIDANCE:
The Company expects conditions in most of its markets to remain stable, and estimates growth in net operating income on a same store basis to be between 4% and 4.5%. It expects to continue implementation of its Dri-guard and Uncle Bob's Truck initiatives, as well as other revenue enhancing programs, in which the Company is investing $6 to $7 million this year.
Additionally, over the next 30 months, the Company plans to implement a program that will add 450,000 to 600,000 square feet of rentable space at existing stores and convert up to an additional 250,000 to 300,000 square feet to premium (climate and humidity controlled) space. The projected cost of these revenue enhancing improvements is estimated at between $32 and $40 million. Funding of these and the above mentioned improvements will be provided primarily from borrowings on the Company's line of credit, and issuance of common shares in the Company's Dividend Reinvestment Program and Stock Purchase Programs.
As opportunities arise, the Company may acquire self-storage facilities with high growth potential for its own portfolio, and may sell certain facilities depending on market conditions. For purposes of issuing 2005 guidance, the Company is forecasting accretive acquisitions of $50 million, opportunistic acquisitions of $20 million and no sales of existing facilities.
Cost increases incurred by the Company, especially for fees and expenses associated with Sarbanes Oxley Section 404 Compliance, negatively affected operating results in 2004. The Company expects most of these costs to continue through 2005 and has adjusted guidance accordingly.
At June 30, 2005, all but $61 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 0.9%.
Management expects funds from operations for 2005 to be between $2.94 and $2.98 per share. Funds from operations for the third quarter of 2005 are projected at between $.76 and $.78 per share.
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 ability to form joint ventures and sell existing properties to those joint ventures; 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 effectively compete in the self-storage industry; the Company's ability to successfully extend its truck leasing program and Dri-guard product roll-out; the Company's reliance on its call center; the Company's cash flow may be insufficient to meet required payments of principal and interest; and tax law changes which may change the taxability of future income.
CONFERENCE CALL:
Sovran Self Storage will hold its Second Quarter Earnings Release Conference Call at 9:00 a.m. Eastern Daylight Time on Thursday, August 4, 2005. Anyone wishing to listen to the call may access the webcast via Sovran's homepage www.sovranss.com. The call will be archived for a period of 90 days after initial airing.
Sovran Self Storage, Inc. is a self-administered and self-managed equity REIT whose business is acquiring, developing and managing self-storage facilities. The Company owns and/or operates 283 stores under the "Uncle Bob's Self Storage"(R) trade name in 21 states. 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)
June 30, December 31,
(dollars in thousands) 2005 2004
----------------------------------------------- --------- ------------
Assets
Investment in storage facilities:
Land $157,243 $148,341
Building and equipment 704,854 663,175
--------- ------------
862,097 811,516
Less: accumulated depreciation (119,703) (109,750)
--------- ------------
Investments in storage facilities, net 742,394 701,766
Cash and cash equivalents 6,556 3,105
Accounts receivable 1,236 1,530
Receivable from related parties 75 90
Notes receivable from joint ventures 2,529 2,593
Investment in joint ventures 949 1,113
Prepaid expenses 3,099 3,282
Other assets 6,030 6,094
--------- ------------
Total Assets $762,868 $719,573
========= ============
Liabilities
Line of credit $71,000 $43,000
Term notes 200,000 200,000
Accounts payable and accrued liabilities 11,287 9,121
Deferred revenue 4,280 3,824
Fair value of interest rate swap agreements 2,749 3,425
Accrued dividends 9,934 9,663
Mortgages payable 49,619 46,075
--------- ------------
Total Liabilities 348,869 315,108
Minority interest - Operating Partnership 11,918 12,007
Minority interest - Locke Sovran II, LLC 14,542 15,007
Shareholders' Equity
8.375% Series C Convertible Cumulative
Preferred Stock 53,227 53,227
Common stock 176 171
Additional paid-in capital 433,280 418,007
Unearned restricted stock (2,108) (1,774)
Dividends in excess of net income (67,283) (61,751)
Accumulated other comprehensive loss (2,578) (3,254)
Treasury stock at cost (27,175) (27,175)
--------- ------------
Total Shareholders' Equity 387,539 377,451
--------- ------------
Total Liabilities and Shareholders' Equity $762,868 $719,573
========= ============
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
April 1, 2005 April 1, 2004
(dollars in thousands, except per share to to
data) June 30, 2005 June 30, 2004
---------------------------
Revenues:
Rental income $32,897 $29,319
Other operating income 1,110 895
------------- -------------
Total operating revenues 34,007 30,214
Expenses:
Property operations and maintenance 8,642 7,513
Real estate taxes 3,095 2,714
General and administrative 2,955 2,626
Depreciation and amortization 5,415 4,867
------------- -------------
Total operating expenses 20,107 17,720
------------- -------------
Income from operations 13,900 12,494
Other income (expense)
Interest expense (4,799) (4,275)
Interest income 121 104
Minority interest - Operating
Partnership (270) (236)
Minority interest - consolidated joint
venture (131) (119)
Equity in income of joint ventures 57 44
------------- -------------
Income from continuing operations 8,878 8,012
Income from discontinued operations - 42
------------- -------------
Net Income 8,878 8,054
Preferred stock dividends (1,256) (2,204)
------------- -------------
Net income available to common
shareholders $7,622 $5,850
============= =============
Per common share - basic:
Continuing operations $0.47 $0.39
Discontinued operations - -
------------- -------------
Earnings per common share - basic $0.47 $0.39
============= =============
Per common share - diluted:
Continuing operations $0.47 $0.39
Discontinued operations - -
------------- -------------
Earnings per common share - diluted $0.47 $0.39
============= =============
Common shares used in basic
earnings per share calculation 16,189,034 14,905,067
Common shares used in diluted
earnings per share calculation 16,351,979 15,000,512
Dividends declared per common share $0.6050 $0.6025
============= =============
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
January 1, 2005 January 1, 2004
(dollars in thousands, except per to to
share data) June 30, 2005 June 30, 2004
-------------------------------
Revenues:
Rental income $64,108 $57,069
Other operating income 2,048 1,649
--------------- ---------------
Total operating revenues 66,156 58,718
Expenses:
Property operations and maintenance 17,142 14,925
Real estate taxes 6,112 5,459
General and administrative 5,901 5,089
Depreciation and amortization 10,644 9,559
--------------- ---------------
Total operating expenses 39,799 35,032
--------------- ---------------
Income from operations 26,357 23,686
Other income (expense)
Interest expense (9,279) (8,413)
Interest income 219 217
Minority interest - Operating
Partnership (509) (549)
Minority interest - consolidated
joint venture (223) (196)
Equity in income of joint ventures 81 89
--------------- ---------------
Income from continuing operations 16,646 14,834
Income from discontinued operations - 795
--------------- ---------------
Net Income 16,646 15,629
Preferred stock dividends (2,513) (4,409)
--------------- ---------------
Net income available to common
shareholders $14,133 $11,220
=============== ===============
Per common share - basic:
Continuing operations $0.88 $0.71
Discontinued operations - 0.05
--------------- ---------------
Earnings per common share - basic $0.88 $0.76
=============== ===============
Per common share - diluted:
Continuing operations $0.87 $0.71
Discontinued operations - 0.05
--------------- ---------------
Earnings per common share -
diluted $0.87 $0.76
=============== ===============
Common shares used in basic
earnings per share calculation 16,113,331 14,712,289
Common shares used in diluted
earnings per share calculation 16,269,914 14,854,224
Dividends declared per common share $1.2100 $1.2050
=============== ===============
COMPUTATION OF FUNDS FROM OPERATIONS (FFO) (1) - (unaudited)
April 1, 2005 April 1, 2004
(dollars in thousands, except share to to
data) June 30, 2005 June 30, 2004
--------------------------------
Net income $8,878 $8,054
Minority interest in income 401 355
Depreciation of real estate and
amortization of intangible assets
exclusive of deferred financing fees 5,221 4,706
Depreciation of real estate included
in discontinued operations - 12
Depreciation and amortization from
unconsolidated joint ventures 119 117
Preferred dividends (1,256) (2,204)
Funds from operations allocable to
minority interest in
Operating Partnership (383) (304)
Funds from operations allocable to
minority interest in
Locke Sovran II, LLC (381) (360)
--------------- ----------------
Funds from operations available to
common
shareholders 12,599 10,376
FFO per share - diluted ** $0.76 $0.69
Common shares - diluted 16,351,979 15,000,512
Common shares if Series C Preferred
Stock is converted 1,840,488 **
--------------- ----------------
Total shares used in FFO per share
calculation ** 18,192,467 15,000,512
January 1, 2005 January 1, 2004
to to
(dollars in thousands, except share June 30, 2005 June 30, 2004
data)
--------------- ----------------
Net income $16,646 $15,629
Minority interest in income 732 745
Depreciation of real estate and
amortization of intangible
assets exclusive of deferred
financing fees 10,277 9,241
Depreciation of real estate included
in discontinued operations - 82
Depreciation and amortization from
unconsolidated joint ventures 237 233
Gain on sale of real estate - (593)
Preferred dividends (2,513) (4,409)
Funds from operations allocable to
minority interest in
Operating Partnership (732) (640)
Funds from operations allocable to
minority interest in
Locke Sovran II, LLC (722) (675)
--------------- ----------------
Funds from operations available to
common
shareholders 23,925 19,613
FFO per share - diluted ** $1.46 $1.32
Common shares - diluted 16,269,914 14,854,224
Common shares if Series C Preferred
Stock is converted 1,840,488 **
--------------- ----------------
Total shares used in FFO per share
calculation ** 18,110,402 14,854,224
(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.
** Preferred stock dividends were excluded from the 2005 FFO per share
calculation because of the dilutive effect of the Series C
Convertible Preferred Stock under the "if converted" method. The
2,400,000 outstanding Series C Convertible Preferred Shares are
convertible into 1,840,488 common shares. These shares have been
added to the diluted shares outstanding to calculate the FFO per
share in 2005. The "if converted" method was not used in 2004 FFO per
share or the 2004 and 2005 earnings per share because it would have
had an antidilutive effect on the per share calculations.
QUARTERLY SAME STORE
DATA (2) April 1, 2005 April 1, 2004
to to Percentage
(dollars in thousands) June 30, 2005 June 30, 2004 Change
-------------------------------------------
Revenues:
Rental income $32,026 $30,496 5.0%
Other operating income 1,021 861 18.6%
--------------- ---------------- ----------
Total operating
revenues 33,047 31,357 5.4%
Expenses:
Property operations,
maintenance, and real
estate taxes 11,285 10,606 6.4%
--------------- ---------------- ----------
Operating income $21,762 $20,751 4.9%
(2) Includes the 262 stores owned and/or managed by the Company for
the entire periods presented.
YEAR TO DATE SAME STORE
DATA (3) January 1, 2005 January 1, 2004
to to Percentage
(dollars in thousands) June 30, 2005 June 30, 2004 Change
--------------- ---------------------------
Revenues:
Rental income $62,317 $59,278 5.1%
Other operating income 1,880 1,571 19.7%
--------------- ---------------- ----------
Total operating
revenues 64,197 60,849 5.5%
Expenses:
Property operations,
maintenance, and real
estate taxes 22,450 21,192 5.9%
--------------- ---------------- ----------
Operating income $41,747 $39,657 5.3%
(3) Includes the 261 stores owned and/or managed by the Company for
the entire periods presented.
OTHER DATA Same Store (2) All Stores
-------------------------- --------------
2005 2004 2005 2004
---- ---- ---- ----
Weighted average quarterly
occupancy 86.2% 85.5% 85.5% 85.5%
Occupancy at June 30 87.1% 86.3% 86.5% 85.8%
Rent per occupied square
foot $9.58 $9.16 $9.62 $9.16
Investment in Storage Facilities:
---------------------------------
The following summarizes activity in storage facilities during the six
months ended June 30, 2005:
Beginning balance $811,516
Property acquisitions 45,566
Improvements and equipment
additions:
Dri-guard / climate
control installations 423
Expansions 1,851
Roofing, paving,
painting, and
equipment 2,994
Rental trucks 308
Dispositions (561)
-------------
Storage facilities at cost
at period end $862,097
=============
June 30, 2005 June 30, 2004
--------------------------------
Common shares outstanding at
June 30 16,419,848 15,041,465
Operating Partnership Units
outstanding at June 30 494,269 501,999
Source: BUSINESS WIRE
All trademarks and copyrighted information contained herein are the property of their respective owners.
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