Sovran Self Storage Reports Fourth Quarter Results; Same Store Revenues Increase 8.2%

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Sovran Self Storage Reports Fourth Quarter Results; Same Store Revenues Increase 8.2%

BUFFALO, N.Y.--(BUSINESS WIRE)-- Sovran Self Storage, Inc. (NYS: SSS) , (www.unclebobs.com/company) a self storage real estate investment trust (REIT), reported operating results for the quarter and year ended December 31, 2012.

Uncle Bob's Self Storage recently renovated a San Antonio storage facility located at 6015 Tezel Roa ...

Uncle Bob's Self Storage recently renovated a San Antonio storage facility located at 6015 Tezel Road San Antonio, TX 78250 (Photo: Business Wire)

Net income available to common shareholders for the fourth quarter of 2012 was $13.5 million or $0.44 per fully diluted share. For the same period in 2011, net income available to common shareholders was $10.3 million, or $0.37 per fully diluted common share.


Funds from operations (FFO) for the quarter were $0.77 per fully diluted common share compared to $0.73 for the same period last year. The Company incurred net acquisition costs of $1.9 million in connection with its property purchases in the fourth quarter of 2012; in the fourth quarter of 2011, it incurred acquisition costs of $0.3 million. Absent these acquisition charges, FFO per share was $0.83 and $0.74 for the fourth quarter of 2012 and 2011, respectively.

Strong demand, improved occupancies and the reduced use of move-in incentives contributed to the increase in FFO for the fourth quarter of 2012.

David Rogers, the Company's CEO, commented, "We had a very good quarter which capped off an exceptional year. We're pleased with the continued strong performance of our core stores, and we are delighted with the new properties we acquired in December."

OPERATIONS:

Total revenues increased 13.9% over last year's fourth quarter, while operating costs increased 8.4%, resulting in an NOI (3) increase of 16.8%. Overall occupancy averaged 86.2% for the period and rental rates improved to an average of $10.73 per sq. ft.

Revenues for the 361 stores wholly owned by the Company for the entire quarter of each year increased 8.2% from those of the fourth quarter of 2011, the result of a 590 basis point increase in average occupancy and strong growth in insurance commissions.

Same store operating expenses increased 1.8% for the fourth quarter of 2012 compared to the prior year period, the result of increased property tax charges of 9.3% offsetting a decrease in all other operating costs of 0.8%.

Consequently, same store net operating income increased 11.7% this period over the fourth quarter of 2011.

General and administrative expenses grew by approximately $1.0 million over the same period in 2011, primarily due to increased salaries and internet advertising offset by a reduction in taxes associated with our taxable REIT subsidiary as a result of solar tax credits.

During the fourth quarter of 2012, the Company experienced positive same store revenue growth in every state in which it operates. The stores with the strongest revenue impact include those in Texas, Florida, North Carolina, and Georgia.

For the full year 2012, same store revenues increased by 6.3% and same store NOI improved by 10.3%. Same store occupancy at December 31st increased by 550 basis points to 87.0% from that of December 31, 2011.

PROPERTIES:

As previously announced, the Company acquired 14 self storage properties late in the fourth quarter of 2012: six self storage facilities in Chicago, IL; four in Southwest Florida; three in Austin, TX; and one in Phoenix, AZ. The stores were acquired via six separate transactions at a total cost of $83 million and were funded through advances on the Company's line of credit.

The properties total approximately one million square feet and complement the Company's existing portfolio as all are located in markets in which the Company already has a presence.

During 2012, the Company acquired a total of 28 stores for its own portfolio at a cost of $189 million. It also added 17 properties via its Uncle Bob's Management platform.

CAPITAL TRANSACTIONS:

Illustrated below are key financial ratios at December 31, 2012:

    - Debt to Enterprise Value (at $62.10/share)    26.4%
- Debt to Book Cost of Storage Facilities39.0%
- Debt to EBITDA Ratio5.4x
- Debt Service Coverage3.0x
 

At December 31, 2012, the Company had approximately $7.3 million of cash on hand, and $70 million available on its line of credit (without considering the additional $75 million available under the expansion feature).

YEAR 2013 EARNINGS GUIDANCE:

Management is encouraged by greater customer traffic and resiliency in most markets. The following assumptions covering operations have been utilized in formulating guidance for the first quarter and full year 2013:

     

Same Store

Projected Increases Over 2012

1Q 2013

   

Full Year 2013

 
Revenue6.0 - 7.0%4.5 - 5.0%
 
Operating Cost (excluding property taxes)3.5 - 4.0%3.5 - 4.5%
Property Taxes

3.5 - 4.0%

4.5 - 5.0%

Total Operating Expenses3.25- 3.75%4.0 - 4.75%
 
Net Operating Income7.5 - 8.5%5.0 - 5.5%
 

The Company intends to spend up to $25 million on its expansion and enhancement program. It has also budgeted $13 million to provide for recurring capitalized expenditures including roofing, paving, and office renovations.

Purchases of properties made in 2013 are not expected to significantly impact guidance inasmuch as the Company expects to invest in both low occupancy turn-around opportunities as well as stabilized properties. Accordingly, neither the NOI nor the acquisition costs relating to any acquisitions that may be made in 2013 is included in guidance.

General and administrative expenses are expected to increase to approximately $34 million due to the need for additional personnel required for recent acquisitions, income taxes on its taxable REIT subsidiaries, and the Company's plans to continue expanding its internet marketing presence and revenue management programs.

At December 31, 2012, all but $105 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 2.0%.

At December 31, 2012, the Company had 30.4 million shares of common stock outstanding and 0.2 million Operating Partnership Units outstanding.

As a result of the above assumptions, management expects funds from operations for the full year 2013 to be approximately $3.46 to $3.50 per share, and between $0.80 and $0.82 per share for the first quarter of 2013.

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 Fourth Quarter Earnings Release Conference Call at 9:00 a.m. Eastern Time on Thursday, February 14, 2013. 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 conference ID 407404.

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 461 self storage facilities in 25 states under the name "Uncle Bob's Self Storage"®. For more information, visit www.unclebobs.com, like us on Facebook, or follow us on Twitter.

SOVRAN SELF STORAGE, INC.
BALANCE SHEET DATA
(unaudited)
     
December 31,December 31,
(dollars in thousands)2012   2011
Assets
Investment in storage facilities:
Land$299,544$263,407
Building, equipment and construction in progress 1,456,410  1,275,188 
1,755,9541,538,595
Less: accumulated depreciation (328,952) (292,722)
Investment in storage facilities, net1,427,0021,245,873
Cash and cash equivalents7,2557,321
Accounts receivable3,4502,938
Receivable from joint venture856589
Investment in joint venture34,25531,939
Prepaid expenses4,9473,939
Intangible asset - in-place customer leases (net of accumulated
amortization of $10,337 in 2012 and $7,019 in 2011)2,8912,523
Other assets3,7854,850
Net assets of discontinued operations -  43,702 
Total Assets$1,484,441 $1,343,674 
 
Liabilities
Line of credit$105,000$46,000
Term notes575,000575,000
Accounts payable and accrued liabilities36,66731,414
Deferred revenue6,4166,084
Fair value of interest rate swap agreements15,70710,748
Mortgages payable 4,251  4,423 
Total Liabilities743,041673,669
 
Noncontrolling redeemable Operating Partnership Units at redemption value12,67014,466
 
Equity
Common stock316301
Additional paid-in capital943,604862,467
Accumulated deficit(172,773)(169,799)
Accumulated other comprehensive loss(15,242)(10,255)
Treasury stock at cost (27,175) (27,175)
Total Shareholders' Equity 728,730  655,539 
Total Liabilities and Equity$1,484,441 $1,343,674 
 

CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
      
October 1, 2012October 1, 2011
toto
(dollars in thousands, except share data)December 31, 2012   December 31, 2011
 
Revenues
Rental income$57,873$50,745
Other operating income3,3453,042
Management fee income 914  766 
Total operating revenues62,13254,553
 
Expenses
Property operations and maintenance14,75713,972
Real estate taxes5,6014,808
General and administrative8,6057,643
Acquisition related costs1,947230
Impairment of storage facility-1,047
Depreciation and amortization9,9149,000
Amortization of in-place customer leases 517  1,003 
Total operating expenses 41,341  37,703 
 
Income from operations20,79116,850
 
Other income (expense)
Interest expense (A)(8,252)(8,809)
Interest income152
Casualty loss-(126)
Gain on sale of real estate6871,511
Equity in income (losses) of joint ventures 327  67 
 
Income from continuing operations13,5549,545
Income from discontinued operations -  837 
Net income13,55410,382
Net income attributable to noncontrolling interests (92) (126)
Net income attributable to common shareholders$13,462 $10,256 
 
Earnings per common share attributable to common shareholders - basic
Continuing operations$0.44$0.34
Discontinued operations$- $0.03 
Earnings per share - basic$0.44 $0.37 
 
Earnings per common share attributable to common shareholders - diluted
Continuing operations$0.44$0.34
Discontinued operations$- $0.03 
Earnings per share - diluted$0.44 $0.37 
 
Common shares used in basic
earnings per share calculation30,289,25628,006,221
 
Common shares used in diluted
earnings per share calculation30,453,05928,077,773
 
Dividends declared per common share$0.4500 $0.4500 
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